Analysis of the Impact of Lead Time Reduction on Inventory Management in the Adhesives Business of a Chemical Company

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Summary The purpose of this thesis was to investigate the significant role that supply chain management (SCM) and innovative business models play in enhancing the competitive advantage of businesses, with a specific emphasis on the adhesives industry. The research includes an in-depth analysis of inventory management and lead time reduction strategies, with the purpose of determining the impact that these strategies have on the efficiency of operational procedures.

The research was carried out within the adhesives department of a chemical company, with a particular emphasis on four distinct assets: two, which were produced by the company itself, and two, which were manufactured by third-party companies. The primary goals were to evaluate the efficiency of the initiatives that were implemented to reduce lead times and to comprehend the impact that these initiatives had on inventory management and the overall efficiency of the supply chain. Using advanced analytical tools, as Microsoft Excel and SAP, it was possible to gather a broad understanding by combining qualitative and quantitative approaches, as well as by utilizing data from enterprise resource planning (ERP) systems.

The results of the study showed that strategic interventions, as changing materials from Make-to-Order (MTO) to Make-to-Stock (MTS) strategy and optimizing production windows, resulted in a significant reduction in Total Replenishment Lead Time (TRLT). This reduction demonstrated that there is a direct correlation between improved inventory management and shorter lead times. Consequently, these enhancements highlight the efficacy of strategies that aim to reduce lead times, which in turn reduce inventory levels, free up capital, and reduce the costs associated with storage. It's know that when improving lead times and inventory management, there is also a gain in service level, however was not possible to show the improvement in the thesis, for that it would be necessary to have some specific past data from the company related to service level, which wasn't possible.

Implementing advanced enterprise resource planning (ERP) systems and planning tools, like SAP, was also a key part of making supply chain activities run more smoothly. Being able to quickly adjust to market needs was made possible by cutting down on lead times and improving inventory management. This made the company more operationally agile. In the fast-paced and competitive global market we live in now, this change in responsiveness is necessary to stay ahead of the competition between companies.

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Inventory, Inventory Management, Lead Time, Production, Supply Chain, SCM
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