Balance sheet improvement by moving storage upstream

Description
Scientific Instruments Division, one of the key divisions within Thermo Electron Corp., markets and supplies instrumentation for laboratory and industrial settings, including service contracting.

Opportunities
Working with country service organizations each having a stock keeping function results in limited European stock visibility and a relatively high portion of non-moving stock. The perception is that supply and inventory management of spare parts can be professionalized.

Solution
The solution presented focuses on improvements in planning and inventory management policies:

• Store and distribute parts via the most cost optimal channel
• Redirect not used stock to the factories
• Apply aggregated provision rules
• Create uniform part numbering that facilitates same parts usage and consequently makes a virtual European warehouse feasible

Benefits

• Reduction of supply chain costs by distributing spare parts through the optimal distribution channel
• Significant balance sheet improvement by relocation not used stock more upstream in the value chain
• Additional balance sheet improvement due to a decrease in provision; more upstream parts storage implicates a higher spread in parts exchange.