Defining the Problem – Optimizing Inventory Levels in India

For our consulting abroad project with the Indian automaker, Maruti Suzuki, my team has been tasked to work with one of Maruti’s suppliers to reduce their inventory levels and improve inventory storage and packaging methods. While seemingly a simple problem, it has entailed a lot of work—and a number of Skype calls with the client—to get to the bottom of things and accurately define the problem. You see, while on the surface the issue is inventory, what we’ve discovered is the problem actually deals with working capital and the supplier’s need to reduce inventory levels in order to reduce costs. Even my explanation of the discovery of this underlying issue seems simple. But trust me, it has involved a lot of work.

photo 1

Tom at the whiteboard drawing out the model.

First, there’s the work to wake up early in the morning and be on campus by 7:30am for our weekly Skype call to India. Then there’s the work of communicating—understanding language barriers and differences in meaning (although we all speak English)—over the occasional white noise and voice delay caused by Skype. Then there’s the work to make sure we have all the data we need and fully understand the extent of the problem. How much inventory are we talking about? How much gets produced per day? Where is it stored? And what’s the demand frequency from Maruti? How do you track your inventory and place orders with Tier 2 suppliers? How often do you receive supply orders? All these questions need answers. Sometimes the answers are provided, and sometimes not.

photo 2

India CAP Team 3 hard at work.

But we are making progress and each week brings a little more clarity to the problem, a bigger piece of the puzzle, and greater gains made toward formulating a solution. This is a good thing too, because we leave for India in three weeks! Thursday is our next call with Maruti and the supplier and we’re pumped to show them what we’ve come up with: a stochastic simulation model we developed using @Risk to identify optimal inventory levels. What? You don’t understand what I’m talking about? Don’t worry. Neither do I completely. The point is none of this could have been done without the initial work of building a relationship with the client, going back and forth with many emails and asking a lot of questions to first make sure we understood what the real problem was, and then determining how to approach it.

Fingers crossed our presentation to the client goes well! Stay tuned and I’ll tell you all about it next time.

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