$1M Savings per material, per cycle
Lower inventory costs
Reduced scrap risk
Feed up working capital
The challenge
Managing cost and flexibility in packaging production
Packaging material plays a crucial role in shaping the consumer's perception of a brand, making it an important element for businesses to manage efficiently. The cost of packaging materials significantly impacts the total product cost, and optimizing its purchase frequency and volume can help improve profit margins.
Key challenges
Conflicting objectives between the company and supplier
Supplier preferred longer runs; company sought flexibility
Balancing cost reduction with inventory and production flexibility
The solution
Optimizing order frequency and volume for cost efficiency
Demand optimization
Harmonized demand data
Optimized ABC classification
Balanced order frequency and volume
Cost reduction strategy
Resolved conflicts
Defined optimal purchases
Created cost-effective strategy
Implementation approach
1
Mathematical techniques
Explored with enumeration
Removed bottlenecks using constraints
Optimized using linear programming
2
Simulation and estimation
Simulated savings with Monte Carlo
Forecasted outcomes
Assessed scrap risks
3
Execution
Deployed optimized strategy
Adapted in real-time using data
Synced with supplier operations
The impact
Enhancing procurement strategies to drive financial growth
Cost savings
Saved $1M per material, per cycle
Optimized purchase volume
Cut procurement costs
Inventory efficiency
Reduced holding costs
Minimized scrap risk
Improved stock use
Financial Impact
Freed working capital
Enhanced cash flow
Increased flexibility
Looking ahead
Expansion
Extend optimization to other procurement categories
Automation
Leverage AI for real-time demand forecasting
Collaboration
Strengthen supplier partnerships for sustained efficiency
