Case Study – Inventory: FSS Conversion
Business situation: $30M in product sold through a distributor needed to be converted to the company’s Federal Supply Schedule (FSS) over an 18-month period. The products were located at ~200 VA/DOD locations. Each conversion had implications for revenue, cashflow, and current usage rates. Sales developed a transition plan that focused on customer size (biggest customer first). The goal was to create a consistent and predictable plan in terms of revenue and cashflow.
The approach: First, developed a decision model to determine impact on revenue, cashflow, and current usage rate. The plan provided by the Sales team would have been suboptimal. Then, enhanced the model using an operations research technique (constraint-based optimization) to find the optimal path forward.
Business outcome: The model was used to determine the first set of customers to transition and was refreshed on a quarterly basis as data was updated to determine the next set of customers. Impact $5M a quarter (6)
