Situation: Inefficient Operations
An injection molding manufacturer was losing money. Its costing systems did not allow it to track project details, such as quantity of product used, time required and resulting waste. Without being able to plan accordingly, it had surplus raw materials that would decay and inventory that had to be discarded because product formulations had changed.
Approach: Inventory Management
KRM helped this company take control of its costs through strategic reporting and planning. KRM’s team needed to determine the cost drivers and forecast what was coming scheduled for production. With an understanding of what products would be built and what had been sold, the company could deconstruct those products into raw materials and determine exactly what was required to fill its backlog.
From there, KRM implemented an inventory management system, which allowed the company to purchase smartly. By estimating requirement more accurately, it could negotiate better contracts with improved pricing and buy volume when necessary. This step also helped cut inventory costs as it only stocked what was needed and used what it did have.
By applying effective and efficient business processes, KRM was able to help this company remove some of the roadblocks to reaching its full potential.
Results: Reducing Waste and Saving Money
Without under-buying or over-buying, the manufacturer saw a 10 percent reduction in its costs and inventory for the future. This resulted in a number of other benefits. Since they didn’t need as much money from the bank, they reduced carrying charges and increased profitability by 10%, which in turn improved their income statement and balance sheet.
Saving time and resources will also allow this company to set some new goals, and with better reporting, it will be able to monitor its progress more easily and make adjustments as needed. No matter what industry you’re in, any time you can lower working capital and improve your P&L in the process, you’ve hit the jackpot combination for profitability.