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September 27, 2022
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- Our client is a $40 billion global food and grocery retail chain with 18,000 convenience stores and among the top 250 retailers in the world.
- The client approached A&M because he was facing working capital management issues and a high number of cyclical stocks. The latter was an area where there was a reluctance to make changes given the perceived potential impact on sales. This has become more critical due to increases in the cost of goods caused by deteriorating economic conditions (such as soaring inflation, supply chain disruptions and fuel price increases), which has had an additional impact on working capital.
- The client also faced an internal conflict between the internal logistics and sales teams, as they had different views on how to improve working capital without limiting turnover.
- Using A&M’s retail industry experts and our experienced digital data scientists, we quickly understood the business challenges of making a rapid diagnosis. We recognized that there was a disparity of information across the business, so we identified data sources across the organization that were brought together and transformed by our AI-powered tool (the Quantum Navigator) to create actionable insights.
- We used transactional level inventory data to create a “best fit” pack size at the entire trade chain level. We were able to help optimize excessive trade inventory with this solution, with no impact on availability and sales.
- Our tool provided the information and evidence needed to begin negotiations with suppliers on a more informed and analytical basis, resulting in the client gaining a better negotiating position. We also supported the business by participating in negotiations with suppliers to help them agree on optimal packaging sizing, which had a direct impact on working capital throughout the business chain.
- We have automated our tool for speed and efficiency and integrated it into the client’s systems to improve its usability. This has been integrated into the client’s processes and working methods following our approach to training, knowledge sharing and development.
The impact of A&M
- We calculated a potential $200 million working capital reduction opportunity by running inventory data through our tool on an optimized basis, and delivered $6 million through the pilot phase of the project which proved the concept.
- In addition, the retail customer and suppliers were able to identify the optimal allocation of inventory in stores based on package size.
- The tool provided a sustainable solution to optimize logistics units, maximizing sales with optimal working capital required between the retail customer and their suppliers.