This client reference story is drawn from a thesis presented for the European Master Logistician education programme.
Company profile: Kwintet KLM Kleding
The company is part of the Kwintet Group which has companies in several European countries. It supplies high quality working clothes and image wear for a wide variety of industries and activities. Its innovative products are offered both in standard ‘catalog’ ranges and as customer specific tailor made offerings. Its aim: to offer its customers the most reliable logistic services in its field.
A Voorne Partners consultant worked with employees to identify how reductions in working capital could be achieved while the same high customer service levels were maintained. All business processes, controls, organizations and IT systems were analyzed to identify potential improvements that would optimize the supply chain.
Assessing product/market combinations
First step in the process was to determine the logistic needs of the different product/market combinations by analyzing customers, products and their demand patterns and presenting these in a requirements matrix. One major finding was that while 80% of the catalog products sold to dealers were needed within a few days, required delivery time for the other 20% was several weeks. Most customers for tailor made products accepted longer delivery schedules because the garments were being produced exclusively for them and delivered directly to them. One exception was the laundry market, where damaged garments had to be replaced immediately. The matrix offered a new insight into the relationship between product categories and customer needs and provided the basis for determining sourcing strategies.
Optimizing strategies
Kwintet KLM Kleding sourced its products from the Far East and from its own North African production unit where they were being produced on a ‘make-to-stock’ basis. European raw materials (cloth, zippers, buttons etc) were being sourced and put into temporary storage in The Netherlands, then transported on a weekly basis to storage in North Africa prior to production. Finished products went into temporary storage, then on the weekly transport run back to a warehouse in the Netherlands. Lead time for a product sourced from North Africa was more than a month: one third sourcing and transporting the raw materials to North Africa, the rest in production and transport back to The Netherlands. Analyses showed that this lead time could be reduced by one third by building up sufficient stocks of raw materials in North Africa. Higher raw material storage costs would be offset by a double digit reduction of ‘safety’ stocks of finished products in the Netherlands. These have a higher value than stocks of raw materials. Lowering the average lead time could substantially reduce the need for safety stocks. Raw material value could be lowered if suppliers agreed to deliver on a consignment stock basis – they were prepared to do this in order to gain larger group contracts.
Change in production strategy
Then there were the products with low delivery time requirements, a high proportion of which were being produced on a ‘make-to-stock’ basis in North Africa. Analysis showed that by streamlining some of the business processes and changing the minimum production quantities for these products, lead time could be reduced further, enabling a change from the ‘make-to-stock’ to a ‘make-to-order’ strategy. This would more than offset higher production costs and lower quantities because products could be forwarded directly to customers, removing the need to hold costly stocks of finished products in The Netherlands.
This ‘trade-off’ would provide customers with the service they required while bringing the company a double digit reduction in working capital.
Kwintet KLM Kleding implemented the recommendations.
As Herman Marsman, Managing Director of Kwintet KLM Kleding, said: "The thesis largely met my expectations. The recommendations describe quick and relatively simple changes of the business processes and control, resulting in working capital reductions"
Kwintet KLM Kleding is part of the Kwintet Group which has several companies in different European countries. The Kwintet Group supplies high quality work wear and image wear for many purposes and industries, supplying both standard ‘catalog’ and customer specific ‘tailor made’ products.