A pharma company improved packaging inventory performance through Operational Excellence by reducing excess stock while strengthening service levels yielding significant financial gains.
Context and Challenges
A pharmaceutical plant manufacturing injectable formulations was struggling to balance packaging material availability with working capital. High inventory levels of vials, stoppers, seals, labels, syringes, needles, HDPE trays, inserts and cartons – averaging about four months of stock across items. Yet, despite this high stock, there were around 15 stock-outs per month on critical packaging and auxiliary materials, disrupting filling plans and dispatches. There was no robust inventory logic – reorder decisions were based on experience rather than clear, data-driven norms.
Our Approach
The project was run as a focused Lean inventory initiative on packaging and auxiliary materials.
- Current Stock & Consumption Analysis: Collected data on item-wise stock, unit cost, daily consumption and supplier locations for all major packaging items (vials, stoppers, seals, labels, syringes, needles, trays, inserts, cartons). Calculated stock in days and inventory turnover for each item; many materials were stocked for 55–120 days or more, with turnover as low as 0.9–4.8 turns/month. Confirmed baseline of ₹44.23 lakhs inventory value and 15 stock-outs per month.
- Design of Reorder Level – Fixed Quantity, Variable Time: Choose a Fixed Quantity, Variable Time model for each item, define a Re-Order Level (ROL) and a Standard Delivery Quantity (SDQ). Whenever on-hand stock fell below ROL, a fixed quantity (SDQ) would be replenished.
- Implementation via Inventory Management Sheet: Created an easy-to-use Inventory Management Sheet listing, for each packaging item. Consumption/day, lead time, lead-time consumption, safety stock, ROL and SDQ. Stores and planning teams used this sheet in weekly reviews to trigger purchase orders as soon as stock reached ROL, rather than waiting for crises.
Results Achieved
Within a short period of implementing the new inventory management system, the pharma plant achieved:
- Inventory value reduction: Total packaging and auxiliary material inventory reduced from ₹44.23 lakhs to ₹29 lakhs, releasing around ₹15 lakhs of working capital and delivering about ₹3 lakh per year in carrying cost savings.
- Stock-out reduction: Monthly stock-outs on packaging and auxiliary materials fell from 15 to just 2, sharply reducing production disruptions and emergency follow-ups.
- Service & profitability impact: With far fewer stock-outs, the plant could maintain a more stable production schedule, avoiding lost batches and urgent rescheduling. Estimated benefit of ₹8 lakhs per year from profit recovered on previously lost sales due to stock-outs.
- Process discipline & visibility: Reorder decisions shifted from ad-hoc judgement to transparent, sheet-driven rules based on consumption, lead time and safety stock. Planning, purchase and stores now shared a common view of when to reorder and how much to buy, preventing both over-stocking and shortages.