Maximizing Process Efficiency and Cashflow: Achieving a 90% Reduction in Inventory Outstanding Days

INTRODUCTION

The Client is a leading global project engineering and manufacturing company with a focus on delivering sustainable and reliable solutions to its customers across the globe in the domain of powder and bulk solids.

The company specialises in project activities in air pollution control equipment, size reduction equipment, pneumatic conveying systems, effluent treatment plants and diffused aeration systems.

THE CHALLENGE & ANALYSIS

Renoir was invited to collaborate in a project with the objectives of improving process efficiency, reducing project cycle times and improving working capital management.

Key deliverables from the project were identified as follows:

1. Increasing inventory turnover.
2. Development and installation of systems to drive productivity at the point of execution.
3. Improving bills of materials accuracy and reducing project cycle time.
4. Implementing structured review mechanisms at relevant levels to ensure planning, scheduling and priorities are set and aligned and variances to planned execution are addressed effectively

The programme followed Renoir’s Focus Process® methodology, which has been developed over many years of successful engagements. The methodology has been designed specifically to ensure maximum engagement, ownership and sustainability.

During the initial stages of the Focus Process®, Renoir identified key issues which were preventing the company to reduce project cycle time and improve cash flows:

1. Information transfer and role clarity issues regarding project timelines, cost and quality lacking between departments were a cause of overruns due to rework and delays in dispatches.
2. Lack of weekly/monthly Key Performance Indicators and Dashboards led to opinion-based decision making.
3. Analysis of Budget overruns was absent; there was a lack of learning which could be fed into SOPs and plans.
4. Extension of project cycle times resulted in delays in cash flows.
5. Gaps in Material Requirements Planning (MRP) resulted in bloating of inventory stock which hugely impacted working capital.

Focused discussions were undertaken with key process owners to gain an understanding of the daily issues. Past projects were analysed which identified issues in dispatch planning, inventory tracking, project execution and variances in key indicators. This included reviewing the checks and controls in place in the form of management system elements that guide behaviour and which lead to the desired level of output.

“The focus on MRP and segregation of inventory was possible due to the role played by Renoir.”

Factory Head

In addition to these issues, we identified opportunities around project management, material resource planning and tracking and establishing and tracking KPIs of activities to reduce process and project cycle times, review mechanisms and meeting effectiveness.

To manage the initiative and ensure engagement from all process owners, a cross functional Management Action Team (MAT) was formed and involved participants from those functions that had the most impact on performance.

IMPLEMENTATION

To improve order to dispatch process efficiency, our focus was to:

1. Establish SOPs, responsibilities and accountabilities for each department/process.
2. Identify, establish and track KPIs and circulate weekly/monthly operational and financial dashboards to all levels of management.
3. Install a Root Cause Analysis culture with resulting actions mainly to address MRP issues.
4. Increase communication between Design and Engineering and Manufacturing departments to increase ‘right first time’ fabrication.
5. Additionally, to encourage informed decision making, weekly and monthly dashboards were installed that captured departmental performance, divisional cash flows and vendor performance.

To encourage process standardization, we promoted transparency in sharing performance metrics, best working practices, and standardized formats for project documentation across all divisions. Initiatives aimed at improving efficiency and cooperation between the divisions were also encouraged.

KEY RESULTS