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AkzoNobel Performance Additives (ANPA) was under pressure to improve its cash flow and therefore looked for ways to manage its business with less inventory. However, before reducing its inventory ANPA wanted to understand if current inventory levels were appropriate compared to other companies and if they made sense from a business and supply chain strategy’s point of view.

Furthermore, they wanted to understand what could be done to bring inventory levels in line with strategic priorities as well as to assess the size of the opportunity. The goal was to avoid damaging their competitive position by making the company less responsive (by reducing inventory levels) without understanding the full picture.

The approach 

To answer such a broad range of questions efficiently we used a hypothesis-driven project approach that enabled us to start out on a fairly broad front and then to quickly focus in and only perform detailed analyses in promising areas. The project started out with a few high-level analyses, a SCOR-based benchmark of Elotex’s supply chain performance and a maturity assessment of its supply chain management processes. The initial results were used to build working hypotheses to guide the detailed root cause analysis, solution design and opportunity assessment that were at the heart of the second and third project phases.

The answers 

The benchmark showed that inventory levels were below parity and ANPA’s aspirations. This was mainly due to:

  • Sales in volatile markets
  • Make-to-forecast as the key production strategy combined with low forecast accuracy (ANPA was not aware of this due to the use of an unsuitable measurement method)
  • Weaknesses in demand management processes and in the integration of demand and supply management

Faced with these conditions, plant schedulers used inventory to buffer demand uncertainty and maintain very high levels of delivery reliability and responsiveness.

Consequently, the key solution hypothesis was to segment Elotex’s supply chain and apply different demand and supply management principles and processes to each segment that better fit market characteristics and ANPA’s priorities.

Specifically, the project team went on to build supply chain segments based on their importance to ANPA and on the ability to plan. That initial set of segments was used to define service levels (e.g. availability, response time) that drive more refined and segment-based buffering strategies using safety time and reserved production windows (“MTOpriority“), for example. To successfully implement the buffering strategies, changes to tactical operations planning, master production scheduling and detailed plant scheduling were defined. On the demand management side a new segment-dependent forecasting process was outlined that combined the efficiency of tool-supported baseline forecasts and human market intelligence. This also included the evaluation of a forecasting tool.

Once the key parameters for each supply chain segment had been identified we were able to roughly calculate a new minimum stock level cycle and revised safety stock settings. That data was used to answer the question “what is the size of the opportunity?”; considerable – approximately 20% less inventory with a considerable upside.

As a last step, the changes required for each segment were finalised and translated into implementation activities pertaining to people, processes, and tools.

This meant that after a period of approximately three months, ANPA understood what was to be done, what was to be gained and how to get there. They are now well underway towards achieving this.

As Theo v.d. Beek, Director Operations AkzoNobel Performance Additives said: 
"We were impressed by Voorne Partners’ straightforward and down to earth approach, which was very effective in producing the desired results.

"AkzoNobel Performance Additives. With its Elotex brand AkzoNobel Performance Additives (ANPA) is a leading international producer of building material additives. They supply the ready-mixed mortar industry with high-quality specialty polymers and additives from plants in Europe, the United Stated, and China. Products such as tile and building adhesives, levelling compounds, gap fillers, repair mortars and rendering, waterproofing systems as well as redispersible adhesives and adhesive mortars for thermal insulation composite material systems are derived using Elotex performance additives.