Insights

A newly established furniture company that had a centralized warehouse in Melbourne saw a rapid growth during Covid. The company was struggling with their high inventory levels. They were lacking in having a systematic process to monitor inventory and place orders resulting in placing order in bulk when stocked out. In addition, the longer leadtime were putting an extra strain on profitibility since longer leadtimes mean longer stock outs.

The first task we took to ourselves was to understand what are key drivers of sales in their business and then chalked out step by step process.

The most important element that affects furniture business is the short product lifecycle. On average they were introducing 40 to 50 new products in an year so it was critically important to invlove Product Development team at an early stages of S&OP so that cannabilization impact on existing products could be understood. 

In the ecommerce business, their 35% sales were contributed by marketplace sales with a one marketplace customer accounting for 70% revenue. A process was developed to take the account manager onboard and their key marketplace customer's forecast was factored in as a  major input affecting forecast. 

Lacking brick & mortar presence, their key marketing drivers were through online promotions carried out by performance marketing team. So we helped them build annual promotional calenders based on key events in the Australia and took into account the impact of the advertising efforts through every possible channel.

The unconstrained forecast was rolled onto 12 month basis and shared with respective stakeholders especially finance who ten used it to develop Annual Operating Plan. 

Some of the key highlights of developing this process was:

1- A monthly S&OP process ensured that inventory levels are monitored regularly and steps are taken much earlier to avoid stock outs

2- It was identified that where monthly consumption of any SKUs was less tha MOQ, it was better idea to monitor and place purchase orders bi monthly in optimum quantities instead of placing orders in bulk , less frequently risking having stockouts for longer period of time.

3- It helped identified where supplier consolidation can be achieved resulting in a better SKUs mix with shorter MOQs to meet 40feet containers loading for best freight cost.

Achieving and implementing a  successful S&OP process is vital for furniture industry considering furniture indutry is very susceptible to stock outs or excess stocks due to shorter product lifecycle.

Pen & Darts and its consultants strove hard to ensure that we could the client in number, what they achieved 6 months after successfully implemented the process. 

The net savings, higher profitability and better customer services were the ultimate result of our efforts with delighted customer