Improving your ROCE, it’s a target for a lot of companies, for Umicore RBM (Rechargeable Battery Materials) as well. Improving your customer service, while your inventory remains the same, or even decreases, will impact your ROCE in both ways. Optimal stock levels can result in both.
Up to today, the stock levels at Umicore RBM are based on basic modelling and forecasts. To bring these stock levels to a more optimal level (by adding stochastic & mathematical kwowledge), Möbius was contacted to assist them. Questions from Umicore :
- What are optimal raw material stock targets?
- What is the (financial) impact of multisourcing?
- What is the (financial) impact if possible uncertainties (leadtime, forecast accuracy, minimum order quantities, …) can be reduced?
Möbius and Umicore elaborated the following steps together :
- Scoping and model design
- Construction of a tailor made inventory tool (stock target calculation, simulation & sensitivity analysis)
- Identification and calculation of several scenarios (market opportunities, consignment analysis, uncertainty in leadtime and demand, …)
A tailored and robust model was developed in a very short timespan. It showed Umicore amongst others that:
- Decrease of the current raw material inventory level high in the double digit numbers whilst increasing product availability
- Taking into account flexible sourcing will lead to lower inventory levels
- Focus must be on improving demand variability on the one hand, and working on leadtime variability on the other hand