GPS Customer Case Study:
How a $10 Billion Manufacturer turn their Unprofitable Inventory into Profits
A $10 billion industrial equipment manufacturer recognized they had an inventory problem: Too much inventory! Finance launched an urgent initiative to reduce inventory.
Sales & Customer Service pleaded their case and demanded they maintain the entire inventory, especially service parts, as it was necessary to providing immediate support for their products in the field and customer satisfaction. They believed this justified the buildup of their overall inventory, the increased need for warehouse space, and their skyrocketed overhead costs, which all tied up their valuable working capital.
An analysis of the inventory identified a significant amount of excess and slow moving parts that had sporadic, unpredictable usage but its carrying costs outweighed any future sales or cost benefits. These slow moving parts were also dragging down their very important overall inventory turns.
One of their previous reduction solutions was to sell it on the surplus market which still left them with a lot of residue. Items sold into the surplus market at cost or below often ended up competing against them, or even worse, their customers! They also found items were showing up in their customer returns for full credit.
Their other option was to send the slow moving inventory to the scrap yard but this only provided a short term result. Besides, it was a painstaking effort to determine what to scrap and what to keep. Often within days of disposing of the inventory they ended up having a customer demand. This demand forced them to repurchase the items, usually at higher prices, with long lead times and minimum order requirements which created more slow moving inventory.
GPS Inventory Solutions was called in to help organize and optimize their inventory reduction initiatives. Our profit driven GPS Inventory Bank programs offered them cost effective solutions that reduced or eliminated their overhead and inventory costs and had a positive impact on profits and shareholder value.
Additionally, they retained immediate availability of the items so they could continue to provide a high level of product support to their customers.
Over a four year period of time by using the GPS Inventory Bank Program our customer:
- Reduced their inventory by $24 million and avoided over $21 million in inventory carrying costs
- Retained availability to satisfy 5,576 customer line item demands amounting to $5 million (at cost) of inventory activity for profitable customer sales
- Protected their brand and market integrity
- Provided immediate item availability for long term product support
- Freed up valuable warehouse locations and working capital
- Improved workforce efficiency
- Improved cash flows
- Increased profits and shareholder value
Now that our customer has a proven cost effective exit strategy in place for their entire excess and slow moving inventory, they are no longer spending countless hours and multiple meetings trying to decide what to do every year. Today they can use these resources to better focus on managing their profitable active inventory or other corporate initiatives.
For more information or to schedule a presentation to learn more about how our proven Profit Driven Inventory programs can work for your company, please contact us at (800) 896-0477 or email firstname.lastname@example.org.
GPS Inventory Solutions, Inc.
Toll-Free: (800) 896-0477
GPS Inventory Solutions has been an innovative leader in managing slow moving inventory for manufacturers in a variety of industries for over 30 years. Our goal is to significantly reduce or completely eliminate your costs of carrying excess and slow moving inventory without impacting your customer service, sales or profits. GPS headquarters are located in the Dallas/Ft. Worth area with additional locations in the Nashville, TN area.