Return in project investment
Reduction in production cost/kg
Reduction in finished goods inventry turnover days
About the client
Our client’s business is focused on the production and sales of petrochemical products including solvents, coatings, inks, and lubricants. The company is a major global producer of acetate solvents and one of China’s major manufacturers of ink.
To cope with an increasingly challenging business environment, the company had been in a continuous drive to pursue operational excellence, cost structure optimisation and management effectiveness. After conducting a comprehensive business analysis, we uncovered several opportunities to improve the company’s productivity and efficiency. Following this, we implemented a 30-week project aimed to achieve five key objectives:
- Improve the production quality of a key plant and reduce raw materials wastage by enhancing its management control systems (MCS).
- Optimise the sales and operational procedures to balance demand and supply, reduce inventory levels, re-evaluate the current product mix and improve the overall supply chain.
- Improve purchasing strategy, raising the efficiency and effectiveness of negotiating techniques and reducing the cost of raw materials by joint initiative purchasing and better research and development.
- Improve the logistics management control system to increase efficiency, reduce cases of goods damaged during transportation, and lower overall costs.
- Change management behaviours from firefighting to fact-based, active problem solving.
What we did
The project was split into five workstreams, with one workstream focused specifically on the production plant. After 30 weeks, this is what was achieved:
Workstream 1: Production plant
- A new MCS that improved the overall planning process, giving planners more control over materials and yield. This included a new KPI dashboard that highlighted variances such as cost, quality, and efficiency.
- A proactive quality control system covering Failure Mode Effectiveness Analyses (FMEA), product first-pass yield assessments and root cause analyses.
- Improved formula accuracy through prior testing, and established packaging and inspection control procedures.
Workstream 2: Sales and operations planning (S&OP)
- A new strategic stocking model that tracked and optimised product inventory levels.
- Control mechanisms that increased the response time of planners while reducing peak levels of inventories.
- Optimised S&OP processes to improve the accuracy of sales forecasting to balance supply and demand.
- Reduced the number of stock-keeping units (SKUs) to streamline the overall product mix.
Workstream 3: Procurement
- An optimised procurement MCS that was more systematic and reduced instances of dormant stock. This also included a new methodology for purchasing raw materials.
- A new negotiating tracking mechanism that encouraged proactive negotiating behaviour. Stakeholders could actively monitor the price trends of the raw materials market to minimise feedstock cost.
- A cost reduction programme involving procurement and research and development, that achieved substitution of raw materials and value engineered formulas.
- A new supplier performance evaluation system to improve the quality of raw materials supply.
Workstream 4: Logistics
- An optimised storage and transportation MCS which included batch and first-in-first-out principles.
- Improved storage efficiency that reduced costs by eliminating waste through various quick-win initiatives, reduced warehouse space and met the audit requirements of customers.
- A refined production model to reduce long-distance transport and improve logistics efficiency.
- Introduced third-party logistics (3PL) and carrier evaluation.
- Improving the overall transportation bidding procedure.
Workstream 5: Architectural sales
- A new sales effectiveness MCS that covered daily reports, distributor inventory checking and the collection of local market intelligence.
- Shifting sales to focus on end customers via distribution channels.
- New strategy tools to identify new sales opportunities, better understanding of demands, and development of plans for expanding distribution channels.
In addition to the afore mentioned benefits, the client was also able to:
- Reduce its warehouse space requirements by 50%
- Reduce its raw materials consumption loss by 38%
The sales effectiveness MCS that was introduced in the architectural sales workstream) was also used in a pilot project. As a result, sales revenues increased sharply during the project period. There was also a dramatic increase in channel penetration, thanks to the opening of new sub-distribution stores.
The company’s new, robust management control systems and culture of continuous improvement helped position the company to weather the challenges of an extremely competitive market.
What the client said
“This project with Renoir has helped improve our ability in management and execution. This is an important step in strengthening the muscle of the enterprise and seeking changes amid stable progress to achieve our vision.”
— Client CEO
* We take client confidentiality seriously. While we have kept the brand anonymous, the results are real.