For the better part of a year, the Inventory Stock Quantity and Valuation report was an embarrassment to the IT Director at St. Jude Medical, a global medical devices company in Minneapolis, MN.
The report required a hefty 15-hour downtime of the company’s reporting systems at month-end, yet more often than not it would display a clearly incorrect inventory valuation of $0.00, for a firm that has an annual revenue of $5.6 billion (2014).
How could the IT Director persuade his business counterparts to trust the information from his systems when he could not depend on it for consistent results himself?
A complete “drop and reload” of the data seemed to resolve the issue, but required a further 15 hours of downtime. With no-one able to figure out the cause of the issue, the IT Director was forced to rely on this inefficient method almost every month.
His internal staff did not have the technical knowledge to understand and resolve the issue, and suggestions from his implementation vendor seemed more like a series of break/fixesnot the permanent solution he was looking for.
It was month-end, business analysts in the Finance department were closing their books, and the Inventory Valuation numbers were once again reporting $0.00 for all materials in their system.
Rather than request yet another 15-hour downtime, the IT Director turned to Hau for his extensive prior experience with inventory and materials management.
Hau knew that resolving this issue would mean solving two problems:
- How to get the data for this month’s financial close without an additional 15 hours downtime.
- How to provide a permanent solution to the issue so that the business could close their books on time at the end of each and every month.
Two generally accepted solutions had already been implemented for this client, to no effect. Digging a little deeper, Hau discovered an external process where the company performed a monthly evaluation of their materials. This happened towards the end of every month, near the financial close window.
Crucially, the material valuation process had to complete before the inventory valuation process could begin. When this dependency was overlooked, it resulted in a report with inventory stock values of “$0.00”.
The good news? The material stock quantity values were intact.
As the material valuation prices did not fluctuate greatly month-to-month, the company’s Financial Analyst confirmed that only an approximate valuation was needed to close that month’s books. With the data gained from the material valuation process, Hau was able to quickly assemble an inventory valuation report for all materials across all plants and storage locations for the company.
This interim solution allowed the Financial Analyst to receive the information he needed in less than an hour, and the IT Director was spared from requesting a further 15 hour downtime of the systems that month.
To provide a permanent solution, Hau suggested using a commonly accepted ‘Best Practice’. While this method required 3 months to migrate existing reports to a more stable process and data model, after much regression testing, the IT Director was relieved from this long-standing pain.
The new process required zero downtime of the reporting systems (during month-end or at any other time), resolving even the initial 15-hour downtime the company had accepted as a matter of course. The inventory stock quantities and valuation were instead calculated as part of the nightly batch load window.
In summary, the permanent solution resulted in:
- Elimination of the 15-hour load requirement (saving the company 180 hours of downtime per year).
- Elimination of further downtime due to “drop and reload” operations (saving the company up to a further 180 hours per year).
- The IT Director no longer had to apologize for this issue to his colleagues every month
- Elimination of wasted time spent by internal staff and vendors trying to solve this recurring issue
(We estimate the cost savings to be approximately $54,000 USD or 30 hours/month * 12 months * $150/hour. This does not include time required for issue identification, solution proposals, status meetings, or communication.)
Aside from preserving the reputation of the IT Director and his team, the permanent solution, as proposed and implemented by Hau, allowed them to put this issue to rest and refocus on delivering value across the business.
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