Optimizing Inventory Management in the India Lubes Business

The India Lubes division undertook a significant initiative to enhance customer service levels by increasing inventory coverage to over 110 days. Despite these efforts, the elevated inventory buffers did not yield a corresponding increase in sales over the course of a year. In response, leadership made the strategic decision to implement a 10% reduction in inventory targets. The primary challenge was to achieve this reduction without disrupting service, particularly given the lack of standardization in SKU priorities, inventory parameters, and redistribution decision rights.

Program Management Strategy

As the designated Program Manager, I spearheaded a comprehensive three-layer approach to address this challenge:

• Planning Control Tower / Trajectory: I developed an in-house model to translate the new inventory targets into monthly production plans and month-end inventory trajectories. This proactive strategy allowed us to manage inventory reductions systematically, avoiding ad-hoc cuts that could jeopardize service levels.

• Parameter Reset by SKU Economics: I assembled a cross-functional team comprising members from demand planning, manufacturing, and logistics. This team conducted a thorough review of the outlook for fast-moving and high-volume SKUs, resetting key parameters such as cycle stock, safety stock, and delivery service level agreements (SLAs). This adjustment aimed to lower norms while ensuring that priority supply was protected.

• Network Rebalancing at Lowest Cost: I initiated a logistics workstream to assess coverage across various nodes and implement redistribution strategies based on clear cost and service thresholds. To facilitate this process, we established a biweekly governance cadence to streamline the approval process for product movements and decisions related to warehouse and storage contracts.

Results and Key Trade-offs

Within approximately three months, we stabilized our approach, and pilot initiatives began to demonstrate results within six months. Ultimately, we achieved a remarkable $15 million reduction in inventory valuations over a 24-month period, with savings of $5 million in the first year and $10 million in the second year. By the end of year two, we successfully reduced overall inventory from over 110 days to 85 days.

The primary trade-off in this initiative was the balance between cash flow and service levels. We prioritized the protection of A-SKUs and critical customers while implementing more substantial cuts on slow-moving items and excess inventory at non-strategic locations. This strategic approach not only enhanced our operational efficiency but also ensured that we maintained high service standards for our key customers.