The document discusses inventory optimization and continuous improvement initiatives to minimize supply chain costs while maintaining customer service levels. It defines inventory optimization and outlines how to calculate accurate carrying costs. It also describes classifying inventory based on variability, gross margin, or usage to target reductions. An example case study shows how a specialty chemicals company cut inventory in half through analysis and process changes, reducing expenses while maintaining high customer service. Key performance indicators and typical benefits like reduced costs and increased asset utilization are also summarized.

1. Supporting Organizational Continuous Improvement Initiatives with Inventory Optimization Drew Forte Director of Supply Chain Improvement, FORTE

7. Total Delivered Cost Source Deliver Make Customer $ P1 $ T1 $ S1 $ R1 $ DC1 $ PW1 $ FGINV1 $ PWINV1 $ RMINV1 Total Delivered Cost = $ PW1 + $ PWINV1 + $ R1 + $ FGINV1 + $ DC1 + $ O1 Plan t P1 t T1 t S1 t PW1 t R1 t DC1 Total Mfg Cycle Time = t P1 + t T1 + Mfg t Total Customer Order Cycle Time = t R1 + t DC1 + t O1 $ O1 t O1 Simple Network – Plant Warehouse and DC Inventory

8. Total Delivered Cost Total Delivered Cost = $ PW1 + $ PWINV1 + $ R1 + $ FGINV1 + $ DC1 + $ O1

10. Example – Speciality Chemical Company | Gross Margin Pareto * Note: 338 products delisted Gross Margin Products* % Products Order Hits Weight Stnd Cost Sales 25% 28 2% 19% 24% 26% 25% 50% 102 8% 40% 43% 44% 48% 75% 274 20% 62% 66% 68% 73% 90% 525 39% 78% 78% 84% 88% 100% 1,350 100% 100% 100% 100% 100% 15,297 26,030K $11,000k 32,000k

11. Inventory analysis of BASE case and scenario C017 assumptions further reveal working capital opportunities through rationalization of:  ABC product classification schema  Inventory fill rates  Stock versus make-to-order * M ade T o O rder Iterative Process - Example Variability of Demand Versus Forecast Example – Specialty Chemical Company (continued) |

13. Key Performance Indicators End-to-End Process Metrics Level 1 Metrics Level 2 Metrics Metrics Are Linked to Sub-Activities and Rollup To Executive View Target Setting Policy Setting Target Attainment

14. Continuously Improving | Low Weekly Inventory Flash Report Supply Chain Planning Targets to Achieve Policy A Target vs Actual Target vs Actual Target vs Actual Component Target Actual Service 98% 98.20% Base $8,249,678 $8,208,430 Safety $6,407,250 $6,375,214 Replenishment 96 Hours 93.75 Hours Target vs Actual Target vs Actual Target vs Actual Target vs Actual Target vs Actual Target vs Actual

17. Thank You! Drew Forte Director Supply Chain Improvement, FORTE [email_address]