Lead time improvement for product commercialization
Our client had developed a new product to be introduced in Operations representing the largest Global Technology Commercialization for the year.
The initial supply chain established by the client faced over 2 months of delays in accomplishing commercialization volumes. Threatening their bottom line and hurting their financials.
Context
The client had significant product commercialization delay challenges and engaged us to look for ways to improve their bottom line and processes.
We conducted a supply chain analysis to understand the problem and found:
Supply/Demand:
Issues with inventory and capacity
Sales forecast and open order misalignment with supply
Tech. Qualification: Raw material sample and finished good sample qualification took too long
Logistics: Delays in final approval and export due to international locations
Challenge
There were a number of challenges the client faced in its supply chain that were impacting their efficiency and effectiveness:
Supply/Demand:
On-hand and safety stock of raw materials were insufficient to handle the demand (waiting time for each shipment was at least 2 weeks).
Sales forecast and open orders showed the demand was significantly higher than the on-hand inventory and manufacturing capacity (Lead time was at least two months before the product was ready to be shipped).
Technology qualification: Extensive testing was required for both raw materials and finished goods to be approved, adding a minimum of two weeks to lead time.
Logistics: Finished goods were manufactured in a country where there were exportation delays to international locations globally, resulting in additional lead time delays of 2 weeks.
After analyzing the challenges faced, we proposed and implemented the following solutions:
Supply/Demand:
Negotiated with suppliers to increase on-hand and safety stock of raw materials to 2x monthly order run rate.
Negotiated with manufacturer to increase blending capacity to and safety stock rate by 2x monthly order run rate.
Technology qualification:
Collaborated with Technology team/department to approve raw materials based on defined Certificate of Quality report.
Approved a local lab capable of testing finished goods in the same country as finished good manufacturer.*
Logistics: Established a distribution location in a Free Trade Zone at a port 4 hours drive away from manufacturing location to reduce additional exportation delays
Solution
Result
Total lead time of 16 weeks reduced to 5 weeks when all improvements were implemented.
Total time to complete project was 3 months and all solutions continued to be sustained.
Recommendations for further optimization:
Sourcing of additional finished good blenders closer to key operating locations
Diversify raw materials to reduce single/sole source reliance
Footnote:
*= Results from the lab were shared with Corporate Technology team for approval.