Saving a Business Through Strategic Purchasing Overhaul

The reorganization led to a reduction of 250 staff hours per month, translating to an annual savings of approximately $75,000, based on the average cost of finance department labor.

Problem/ Challenge

A company found itself nearly collapsing under the weight of its inefficient purchasing department. The core issue lay in a flawed forecasting model that indiscriminately suggested purchasing both slow-moving and fast-moving inventory without considering crucial factors like inventory storage costs, capital costs, and the risk of obsolescence due to market changes.

This oversight led to excessive cash consumption and associated costs, further exacerbated by a lack of coordination between the sales and purchasing teams. The purchasing department operated in isolation, relying on outdated sales forecasts that were frequently revised, rendering the initial purchasing plans obsolete.

Additionally, the inventory management system was flawed, complicating the verification of received goods against orders, leading to discrepancies and inefficiencies.

Thanks to the strategic overhaul of our purchasing process, we’ve significantly improved cash flow, reduced waste, and streamlined inventory management. This transformation has not only stabilized our operations but also set us on a path to sustained profitability and growth.

Kate Thomas

Co-Founder

Solutions

Our intervention focused on creating a unified, data-driven approach to inventory management. We introduced a centralized sheet that updated SKU-level sales data daily, linking it with warehouse reports for real-time accuracy.

Our forensic accounting efforts involved meticulous reconciliation processes and audits of all transactions over the past five years. This exhaustive review not only required advanced accounting expertise but also strategic negotiation skills to address past overpayments and revenue leaks.

This streamlined system not only ensured that purchasing decisions were aligned with real-time sales data but also significantly improved inventory accuracy through the introduction of barcode scanning for tracking stock movements.

Download the comprehensive case study to delve deeper into the data-driven decisions and gain valuable insights into the strategies and solutions that drove success.

Results

The restructuring and outsourcing strategy bore immediate and tangible benefits

Cash Flow Improvement

The new system reduced the company's cash requirements by 20%, freeing up vital resources for other areas of the business.

Reduction in Salvaged Goods

By aligning purchases with actual sales data, the company saw a 60% annual reduction in salvaged goods, saving costs and storage space.

Stock Management Efficiency

Instances of stockouts and overstocking were reduced by 80%, ensuring a more reliable supply chain and satisfied customer base.

Profitability Increase

Overall company profitability rose from 8% to 11.6%, reflecting the efficiency gains from the revamped purchasing process and inventory management.

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