CASE STUDY

How a Leading Aluminum Manufacturer Improved Its Manufacturing Process with Demand Forecasting Analytics?

May 27, 2022

Highlights of the Case Study: 

Particulars Description 
Client A multinational aluminum manufacturer that has multiple manufacturing units across the globe 
Business Challenge The client was facing issues due to inaccurate planning, resulting in many unfulfilled orders and high inventory and finished goods holding costs. 
Impact Quantzig’s demand forecasting analytics solution helped the client adapt to the rapidly changing market conditions and develop an analytics-driven inventory replenishment and management plan. 

Game-Changing Solutions for the Manufacturing Industry 

Demand forecasting is significant in the manufacturing industry as it enables businesses to maintain inventory and price their products accurately. The inability to set proper demand forecasting processes in place can result in dire consequences. It can result in a drop in sales, depleted inventory, and lost clientele, leading to a significant loss in revenue. 

However, forecasting inventory stock levels is a challenge as it is subject to multiple variables in a continual state of flux. Demand forecasting helps optimize inventory budgeting, production, and distribution. Therefore, every business needs to incorporate data-driven demand and supply forecasting techniques to adapt to the rapidly changing market conditions. 

The Challenges of the Client 

Our client, a leading multinational aluminum manufacturer, has multiple manufacturing units across the globe. The client was facing issues due to inaccurate demand forecasting models. Its inaccurate demand forecasting was evident in overstocking or understocking of the inventory, which hampered margins. The client also struggled with many unfulfilled orders and high inventory and finished goods holding costs. The client sought Quantzig’s help to streamline demand forecasting and production planning systems and thus achieve a better order fulfillment ratio. 

Quantzig’s Planning and Forecasting Analytics 

Quantzig experts identified that the inefficiency resulted from using an inaccurate demand forecasting approach illustrated by inventory pile-ups and frequent stockouts for some SKUs. Our experts introduced a process that utilized statistical techniques and performed a root cause analysis to identify causes of forecast errors.  

Quantzig’s planning and forecasting analytics team rectified these issues by revamping its demand and supply forecasting strategy. We built an advanced manufacturing demand forecasting solution using machine learning models. We used this solution to forecast weekly and monthly demand for the client’s most significant and volatile products.  

In addition, our experts undertook a process of feature selection, model analysis, and outlier analysis to develop a set of time series models that decomposed changing trends and volatility of our client’s historic sales demand. Quantzig experts also reclassified products/SKUs based on the client’s sales revenues. We set up a comprehensive demand planning process to incorporate seasonality, lead times, and event-based forecast. Qunatzig experts set up a review mechanism for A and B class SKUs and a direct forecast setup for C class SKUs. 

Impact Analysis of Quantzig’s Demand Forecasting Analytic Solutions 

With Quantzig’s demand forecasting analytics solutions, the client could adapt to the rapidly changing market conditions and develop an analytics-driven inventory replenishment and management plan. The demand forecasting analytics solutions provided by Quantzig also enabled the client to redefine its production and distribution processes, which had a positive impact on its manufacturing process.

The other significant business impacts on the client’s business were as follows: 

  • Reduced the inventory and finished goods holding costs by 6% 
  • Reduced the lead time by 25% 
  • Lowered the operating costs by 7% 
  • Profit margins increased by 25% 
  • Derived a forecasting analytics-based demand-supply plan 
  • Achieved a 23% reduction in unfulfilled orders 
  • Increased the accuracy for weekly sales demand by 9% and monthly sales demand accuracy by 11% 
  • Improved supply chain management 
  • Increased margins 

Key Outcomes of Demand Forecasting Analytics:

The overall result of these interventions was a significant reduction in inventory and improvement in order fulfillment, which led to cost savings and higher profit margins. Our intervention also helped improve inter-departmental collaboration, leading to a higher number of purchase orders and fewer lost orders due to lack of raw materials or finished goods. Accurate demand forecasting thus paved the way for better strategic and operational planning, leading to higher revenues and repeat customers. 

Broad Perspective on Demand Forecasting for the Manufacturing Business 

Many organizations in the manufacturing industry have aggressive performance goals related to delivery time reliability, inventory optimization, demand management, order fulfillment rate, order cycle time, and inventory turnover. The ability to effectively forecast fluctuations in demand is crucial to achieving these goals. Quantzig offers demand forecasting solutions that enable synergy among various company divisions, such as supply chain, sales, product manufacturing, and finance. This system allows multiple teams to collaborate, create accurate demand and capacity plans, and smoothen the manufacturing process. Proper demand planning sets the ball rolling for all other functions that drive sales and revenue growth.  

Key Takeaways: 

  • Minimized potential loss in revenue due to poor planning  
  • Reduced inventory and finished goods warehousing costs 
  • Improved communication and planning among procurement, production, sales, and finance departments 
  • Increased profit margins by 25% 
  • Expanded customer base due to quick TATs 

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Related articles: 

Demand Forecasting and Advanced Analytics Solutions Helped a German Automotive Company Increase Profit Margins by 12% 

A Manufacturing Conglomerate Improves Return on Assets by 14% with the Help of Quantzig’s Expertise 

Quantzig’s Order Fulfillment Solutions Helped a Sporting Goods Manufacturing Company Lower Operations Costs by 35 Percent 

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