Two Stockouts and $800K of Excess Inventory.
The client manufactured chemical compounds and blended materials for industrial distribution. Their purchasing process was driven by a combination of buyer intuition, panic-ordering after stockouts, and a min/max system that hadn't been reviewed since 2019.
When a raw material ran out and stopped a line, a buyer would place an emergency order — often for 3–4× what was needed "to make sure it doesn't happen again." The excess sat in the warehouse, consuming carrying cost, until it was eventually written off. Meanwhile, new items added to formulations after 2019 had no reorder rules at all. They simply ran out, stopped production, and created a new emergency order cycle. The warehouse held both too much of everything old and nothing of several things new.
- Conducted a full inventory classification audit — ABC analysis by consumption value, velocity analysis by usage frequency, and dead stock identification (>6 months without movement)
- Identified $800K in excess and dead stock across 214 raw material SKUs; developed a disposition plan covering liquidation, return-to-supplier, and consume-before-reorder rules
- Implemented Odoo Manufacturing with demand-driven MRP: reorder rules derived from actual BOM consumption rates, lead times, and safety stock calculated from actual demand variability — not guesswork
- Built a purchasing workflow where MRP generates draft purchase orders automatically; buyers review and approve rather than generate from scratch
- Configured lot tracking on all raw materials — every incoming batch tagged with supplier lot number and receipt date, enabling FEFO (First Expired, First Out) consumption logic in formulation
- Established monthly inventory review cadence with auto-generated excess and slow-mover reports
- Production stoppages due to raw material stockouts fell from an average of 11 per month to fewer than 1.5 — a direct result of MRP-driven reorder signals replacing manual buyer judgment
- Annual raw material spend decreased 28% despite identical production output — MRP eliminated the panic-buy premium and drove deliberate forward purchasing
- $800K in excess inventory was systematically liquidated or consumed over 9 months — $340K returned to suppliers under return agreements, $220K consumed ahead of new orders, $240K sold at market rate to distributors
- Working capital freed from the inventory cycle: approximately $1.1M by month 12, reducing the company's revolving credit utilization significantly
- Lot traceability implementation also cleared two supplier quality disputes that had been open for 7+ months — the ERP provided the batch genealogy data needed to assign root cause
- Inventory accuracy (physical vs. system) improved from 74% to 98% after a comprehensive cycle count program was built into the ERP workflow
Before — Buyer Intuition
How Purchasing Decisions Got Made
- Production supervisor calls purchasing: "we're out of RM-0091, shut down Line 3"
- Buyer places emergency order for 12 months of supply "to be safe"
- 11 months later, 10 months of supply still sitting, item absorbed into obsolete inventory
- New formulation components added with no reorder rules — invisible until they stock out
- No visibility into what production needs next week, next month, or next quarter
- Annual physical count shows 74% accuracy — 26% of what the system says exists doesn't
After — MRP-Driven Purchasing
How Purchasing Decisions Get Made Now
- MRP runs nightly against confirmed sales orders and production plan — generates draft POs automatically
- Reorder quantities calculated from actual lead times, demand variability, and safety stock formulas
- Buyers review and approve draft POs — strategic judgment, not data entry
- New items added to BOMs automatically inherit MRP rules — no manual setup gap
- 12-week rolling raw material requirement report available to ops, purchasing, and finance
- Cycle count program produces 98% accuracy; ERP moves off paper to real inventory positions
We had a warehouse full of stuff we didn't need and a production floor stopping for stuff we didn't have. The irony wasn't lost on us. The ERP didn't add intelligence — it just put the information we already had into a format that could actually drive decisions.— Plant Manager · Batch Manufacturer · Southwest U.S.
The Inventory Paradox
Excess inventory and stockouts feel like opposite problems. They're not. Both are symptoms of the same root cause: purchasing decisions made without visibility into actual future demand. MRP doesn't prevent stockouts by ordering more of everything — it prevents them by ordering the right things, in the right quantities, at the right time. The result is simultaneously less total inventory and fewer supply interruptions. Operations that implement demand-driven MRP typically see inventory reductions of 20–35% with simultaneous improvement in fill rates.
