Lean Process & Supply Chain – Chemical Company

Download Case Study: Lean Process & Supply Chain – Chemical Company

Problem / Challenge:

Our Client is a private equity owned carveout from a global crop science company. Their products are chemicals used in herbicide and pesticide applications. Certain aspects of the carve-out created significant customer service and supply chain problems manifesting in 68% on-time-in-full (OTIF) and customer inquiries taking weeks to resolve. The result was sudden customer defections and the need for a business operations turnaround.

Virtual Supply Chain Model

The Client operates a virtual supply chain. They own the formulas and brands but outsource production to 15 ‘Tollers’, warehousing to 9 third-party-logistics (3PL) warehouses and transportation to a trucking 3PL.

This asset-lite model can generate high return on assets but is also very complex

Value Stream Map Findings

• Lack of Aligned and Actionable Performance Metrics
  • The two key functions we worked with, Customer Service and Logistics, did not have a scorecard to track performance.
• 14,000 hours of wasted labor in logistics functions
  • Our initial current state process flow mapping of the warehousing operation between our Client and its 3PLs quantified over 14,000 hours of non-value-added work identifying and correcting lot numbers.
• Lack of standard work and SOPs in Customer Service
  • The Customer Service function had large turnover of customer service reps (CSRs) in the transition from the Global company and our Client after the carve-out.
  • New employees did not know how to use the ERP and other software tools.
  • Each CSR had their own way of entering orders and responding to customers.
• Large inventory discrepancies
  • The Client owned the raw materials + packaging at Tollers and finished goods at 3PLs
  • A recent reconciliation resulted in a multimillion dollar write-off due to inaccuracies between Tollers, 3PLs and the Client

Actions

Developed a value stream map and quantified non-value-added work.

Created visual work instructions for Customer Service, 3PLs, Tollers, and WH

Step 1

Created KPIs For Customer Service And Logistics Teams

Objectives/metrics

• % of first response to customer within 16 hours
• Number of open vs. Closed customer inquiries or issues for the week
• All orders received with available inventory the day prior before midnight are released to the WH before noon the next day
• Lines released to the warehouse per labor hour

Objectives/metrics

• Aged Orders by $ Value of Orders
• # of outbound orders needing to be fixed
• % of inbound transfer orders needing to be fixed
• Inventory Accuracy by $ (% discrepancy)
• Defective shipments (qty over/under / defective / wrong item):

Focal Improvement Areas

• Warehouse Operations
  • Mapped the current state of Client and 3PL transactions
  • Used map to create Action Register to track elimination of all 14,000 hours of wasted labor
• Created Standard Work and SOPs
  • Customer Service and Logistics
  • 3PLs and Tollers on using Client systems
• Inventory
  • Created process to integrate 3PL and Toller cycle counting directly into Client inventory system
  • Changed supply chain design to Tollers purchasing raw materials and packaging
• Performance Measures
  • Created performance metrics for Customer Service and Logistics team
  • Facilitated action items to improve poor performance

Quantified Results

• OTIF increased from 68% to 84% in two months
• Burned down $22 million backlog to less than $10 million in two months
• Changed customer inquiry response time from weeks to hours
• Eliminated 14,000 hours of nonvalue-added work in Logistics

Learn more about our Lean Process Improvement and Supply Chain Services