Utility Company

Objective: 

Business process improvement, optimization and standardization initiative for inventory management

Key Challenges:
This client is a utility company that supplies water and gas to the city residents. This company has eight different plants and they had over 14000 materials in their material master and several of those materials had different item codes for the same material in different plants and many of these items were defined as stock items in some plants but non stock items in others. Client finally decided to improve this erroneous inventory practice and sought help from Touchstone to find the problem areas, improve and standardize the process and measure the impact before and after the improvement.

 

Our Solution:‚Äč

Touchstone’s supply chain expert identified the following challenges:

 

  1. Keeping track of the stock of the materials which were defined as stock items in some plants and non stock items in others 
  2. Establishing an effective material requirement planning (MRP) process
  3. Establishing an effective demand planning process
  4. Having troublesome accounting entries unable to differentiate between material stock and consumption accounts
  5. This erroneous practice led the company to tot-up multi-million dollars of blocked investment in dead inventories making a severely negative impact on company’s cash flow, operating cost, profitability in income statement and overall 
  6. net worth of the company in the balance sheet.

 

As a result of an organization wide process improvement initiative-

 

  • Stock items and non stock items were clearly defined and categorized, significantly reducing the number of items in item master
  • Material master data and material master records were standardized
  • Uniform processes were implemented traversing across all the plants
  • This improvement initiative enabled the company to establish efficient processes for S&OP, demand planning, and material requirement planning resulting in an immediate annual profit of $23 million
  • $9 million of additional revenue was generated in that particular financial year by identifying and utilizing the dead stock of several items