Global pharmaceutical company

Challenge

A new client had a stock holding of around £5.2 million at their manufacturing and packaging plant in the North West.

The facility was intended for critical items only, however it had grown over a number of years to an unacceptable level.

Objectives

  • To reduce the stock value, by distinguishing redundant/obsolete from genuine critical items and to then identify a suitable disposal route.
  • Secondly, stock safety levels and reorder quantities were too high. IESA was tasked to suggest suitable levels.
  • All of this needed to be done with the approval of the relevant engineering managers on site.

Solution

Although, not unusual for this industry, there was very much a 'just in case' mentality towards stock holding. Initially IESA compared the annual stock turnover to the stock holding at site. This ratio was then benchmarked against other clients within the pharmaceutical industry in order to prove the case for change.

Additionally, an aged analysis was produced and items over 12 years old were targeted for disposal. At a value of over £1.2million, there was a large amount of stock in this category. IESA worked with the customer to break this into groups and to put this to the relevant engineering department to identify the business need.

Once identified and approved for disposal, IESA worked in conjunction with a partner supplier to collect, catalogue and then purchase the items from the customer.

In addition to obsolete stock, IESA also reviewed safety levels and EOQs (Economic Order Quantities) in comparison to usage and lead time information. New levels were then proposed with three different risk factors, low, medium and high, which provided the client with the opportunity to take gradual steps in reducing these levels.

Benefits

  • The low risk option was selected and, as a result, the stock holding has been reduced by £150,000 to date. Medium and high level reductions are now being explored.
  • Our preferred supplier was able to commit to a free service for collection and cataloguing of redundant items, with a purchase option for repairable items and a recycling service for non-repairable.