Background and setting

Residential building insulation is a product used to thermally insulate new construction and retrofit old construction. It is produced in various thicknesses which yield various thermal resistance and various widths, lengths and facings to comply with various building codes and special end uses. Over the years the residential insulation product line had increased to respond to market needs by offering new thicknesses, widths, lengths and facings, and by combining existing thicknesses, widths, lengths and facings in novel ways. A consequence of this growth was increased inventory at the manufacturing and distribution locations to provide adequate service levels for all products. Over time, however, because the market conditions changed, some items became obsolete and it became necessary to reassess which SKU’s should constitute the product line.

Client Business Objectives

  • Eliminate obsolete products
  • Reduce the number of warehouses stocking marginal products
  • For single customer products produce to customers stated demand
  • Determine acceptable product substitutions substitution
  • Determine warehouse space allocation for standard products

How did UIA help? 

An analysis tool was designed to:
Characterize each SKU with respect to its historical demand , its cost of stocking, its cost of distribution, and its manufacturing complexity. This tool was used identify potential SKU’s for elimination or substitution.
Each SKU targeted for elimination or substitution was thus categorized in one of three different ways:

  • 1) Eliminated outright
  • 2) Substituted with a standard product providing equivalent end use.
  • 3) Redefined as a standard item but better managed through direct contact with few customers to establish demand
  • 4) Limited to the few warehouses where they are most needed.

For SKU’s remaining in the product line warehouse space requirements were based on economic production quantities and safety stocks. The description is provided in Project PS-1.

How the client benefited

  • Reduction of overall inventory
  • Semi-annual product line evaluation
  • Improved service levels
  • More knowledgeable customer service department.

The client reported that a 25% reduction in the number of SKU’s was achieved. This resulted in a 10% reduction of inventory holding cost and satisfied customers.