A global manufacturer of luxury goods, which had a turnover of several billion DKK, had many decentralized warehouses across several European countries, and it wanted to reduce the capital tied up in its stock levels – without compromising the reliability of deliveries or increasing delivery times. Accordingly, Prokura was requested to assess whether the company would benefit from centralizing its multiple warehouses into one centrally located European warehouse.
In constructing the business case, we examined four main issues:
- The financial implications of centralization
- The service implications of centralization
- Identifying potential constraints
- Development of a possible transition plan
By applying advanced formulas for inventory optimization, we were able to visualize the effect that centralization would have on stock levels and therefore the amount of tied up capital.
As a result of this project, we made it visible to senior management that a simple warehouse centralization strategy had the potential for savings of around 40 million DKK to be realized. In addition, optimizing stock afterwards would result in savings as much as 80 million DKK. Based on this recommendation, senior management then decided to start the centralization of European warehousing and storage.
To find out more about this case and other industry solutions for manufacturers of consumer products, please contact Christian Bang-Pedersen.