The Challenge

A consumer brand was experiencing chronic stockouts while sales and retail distribution were growing.

In one year, retailer chargebacks reached approximately $126,000, or 2.4% of the brand's $5.2 million in gross sales. The chargebacks were significant, but they were a symptom of a much larger operating problem.

Forecasts weren't keeping pace with changing demand and new distribution. Supplier invoices were aging, resulting in credit holds and delayed shipments. At the same time, too much working capital was tied up in slower-moving inventory while the products customers wanted most were unavailable.

What We Found

The immediate problem was product availability, but simply ordering more inventory wouldn't solve it.

We analyzed contribution margin by SKU to identify the products driving the business and those that should be discontinued. Excess and short-dated inventory was consuming cash that was needed to restore supply of the most important products.

There was also a forecasting problem. Growing distribution, promotions and backorders had distorted demand, making it difficult to determine appropriate safety-stock levels or establish a reliable replenishment plan.

The business first needed to free cash, prioritize the right products and stabilize the supplier relationship before inventory could be optimized.

What We Did

Excess and short-dated inventory was sold at a discount to generate cash, and underperforming SKUs were discontinued.

We negotiated a payment plan with the supplier, allowing inventory being held on credit to be released and replenishment to resume. Backorders were filled, and safety stock was established to protect service.

For the most important SKU, we deliberately carried additional inventory while demand stabilized. That reduced inventory turns to approximately 3x, but protecting product availability was the immediate priority.

Once service stabilized and backorder activity no longer distorted demand, we rebuilt the planning process around S&OP. Customer-level demand plans incorporated POS and retailer data, planned distribution changes, promotions and marketing activity.

That demand plan was converted into a supply plan and 12-month rolling forecast shared with the supplier, allowing replenishment to become more predictable and responsive to actual demand.

The Result

The business reached and maintained approximately 98% OTIF.

As the S&OP process matured, inventory could then be reduced without sacrificing service. The critical SKU improved from approximately 3x to 8x inventory turns while maintaining 98% OTIF.

Cash flow improved, the supplier relationship stabilized, and on-time fill-rate chargebacks declined as the underlying service problems were resolved.

The operation moved from reacting to stockouts and credit holds to managing demand, supply, inventory and cash as one connected process.