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Medical Device Manufacturer Reduces Inventory 20 Percent, Gains Inventory Control Amid COVID-19

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Key Results: 

  • 10X ROI in 6 months
  • 50% priority shortage avoidance in 3 months
  • 97% customer on-time delivery rate
  • 9.3% inventory reduction in 5 months
  • 20% inventory reduction in 12 months amid the COVID-19 pandemic in 2020

The Challenge 

In early 2019, a global leader in medical technologies had far too much inventory, limited visibility into their procurement operations, and no standardized process to manage it. As with most medical device manufacturers, it was pivotal for the team to deliver on time to customers while continuously looking for opportunities to free up cash.

To manage inventory prior to LeanDNA, team members each spent an estimated six hours to complete a single manual what-if analysis. “It was cumbersome. Every hour a buyer wasn’t working on managing inventory was an hour wasted,” said the Direct Procurement Manager. The team’s strategy for ABC-XYZ order policy classifications often resulted in fewer purchase orders at high quantities to further cushion inventory, leading to a growing excess inventory challenge. Even after buyers completed time-consuming data analysis using ad hoc reports, they still lacked a standardized process to prioritize what to do next. They were bombarded by too many alerts from their ERP system, SAP, and forced to manually identify their top 10 action items every day, with limited root cause information or context as to what value those actions would create. The limited visibility from SAP was not sufficient to manage the complex products and fluctuating demand. The result was missed efficiency and cash-saving opportunities

Gaining focus, operational control, and complete visibility with LeanDNA

This medical device manufacturer’s team partnered with LeanDNA in September 2019 to add total visibility, prioritized action recommendations, and automated analysis—including PPV spend analytics, inventory optimization, and shortage reports—to their operation. After a four-week implementation, they experienced the “fastest return we’ve seen from a software, with 10 times the return in only six months,” said the supply chain analytics manager. The team quickly reduced inventory by 9.3 percent in the first five months and improved customer on-time delivery to 97 percent, freeing up critical working capital and setting up a resilient foundation for future disruption.

Automated shortage alerts to improve on-time delivery

The team also utilized LeanDNA’s shortage analytics to automatically surface their most critical shortages. Before, their ERP system frequently delivered inaccurate messages and red flags, forcing the team to “look at a long list and just do the best they could.” After using LeanDNA for two months, the team prioritized and significantly reduced critical shortages, and have since maintained a 50 percent critical shortage avoidance. [5] They also utilized the supplier trends over time to tackle delivery issues before they resulted in shortages, soon achieving a 97 percent customer on-time delivery rate.

A foundation of operational command and standardized work

With new processes in place, the innovative team gained control over their inventory process, ultimately freeing up critical cash previously tied up in excess inventory while improving customer delivery at the same time. After experiencing the benefits of automated analytics and standardized workflows, the company is now expanding their usage of LeanDNA to sites across the globe. And with these processes in place, the team was prepared to take on unpredictable shifts in product demand that proved pivotal during the COVID-19 pandemic 2020.

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