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This case study represents specific client outcomes under unique circumstances. Results shown are not typical and should not be considered as guaranteed or promised outcomes. Your actual results may vary significantly. See our disclaimer for important information.

Case Study

$2.2M Parts Inventory Discovery

How 6D Foraging discovered an 18× cost multiplier

Direct Cost

$119K

per year

Total Impact

$2.2M

per year

Multiplier

18×

cascade effect

The Challenge

A mid-sized manufacturing company was struggling with parts inventory discrepancies. Their warehouse team was spending approximately 2,400 hours annually locating missing parts, reconciling inventory counts, and expediting rush orders due to stockouts.

Initial Assessment

•2,400 hours/year spent on inventory reconciliation
•$50/hour average fully-loaded labor cost
•$119,000/year direct cost calculated

The company's COO considered this an acceptable cost of doing business. After all, $119K represented less than 0.6% of annual revenue. Traditional cost-benefit analysis suggested that implementing an automated inventory management system would cost $165K, creating a negative ROI.

That's when we applied the 6D Foraging Methodology™.

The Foraging Process

We foraged across all six dimensions, diving deep to discover measurable impacts that surface-level analysis completely missed.

1. Customer Impact

Production delays, expedite fees

$685K

Measured impacts:

• 12% production delay increase due to stockouts (tracked via MES)
• Average customer order value: $95K
• 5 major clients experienced chronic delays
• Expedite fees and rush shipping: $685K annually

2. Employee Impact

Turnover, morale, productivity

$195K

Measured impacts:

• 4 warehouse staff quit in 18 months (exit interviews cited frustration)
• Replacement cost: 1.5× salary ($52K average) = $78K each
• Total: 2.5 turnovers/year × $78K = $195K

3. Revenue Impact

Production downtime, missed orders

$440K

Measured impacts:

• Average production line downtime: 180 hours/year due to parts shortage
• Lost production capacity: $12M potential revenue × 3.6% = $432K
• Late delivery penalties: $8K annually
• Total: $440K opportunity cost

4. Regulatory Impact

Compliance, traceability issues

$98K

Measured impacts:

• Parts traceability audit failures ($35K remediation)
• ISO compliance review additional work ($28K)
• Safety stock verification requirements ($35K)
• Total: $98K annually

5. Quality Impact

Wrong parts, rework, scrap

$252K

Measured impacts:

• Wrong parts installed: 85 incidents/year × $1,800/incident = $153K
• Production rework cycles: $63K annually
• Scrap and obsolescence: $36K
• Total: $252K

6. Operational Impact

Downstream disruption

$411K

Measured impacts:

• Production planning disruption: 950 hours/year × $55/hour = $52K
• Executive time on expedite approvals: 180 hours × $175/hour = $32K
• Engineering time on workarounds: $102K
• Supply chain complexity overhead: $225K
• Total: $411K

Total Annual Impact

Direct Labor Cost:$119,000

Cascading Costs:

Customer Impact$685,000

Employee Impact$195,000

Revenue Impact$440,000

Regulatory Impact$98,000

Quality Impact$252,000

Operational Impact$411,000

Total Annual Impact:$2,200,000

Multiplier Effect: 18×

($2.2M ÷ $119K = 18.5, rounded to 18× for conservative estimate)

The Solution

We designed a GESA (Governed Event Sourcing Architecture) solution to prevent the cascade from recurring:

Event Sourcing Layer

Immutable log of all parts movements, capturing every receipt, transfer, and consumption event before they create discrepancies.

Governance Layer

Automated validation rules preventing stockouts and wrong-part issues. Rules include reorder point automation, parts compatibility verification, and usage pattern anomaly detection.

Intelligence Layer

AI-powered prediction system that learns from historical consumption patterns, flagging potential shortages before production is affected.

Implementation Details

•Timeline: 8-week implementation (design + build + test)
•Cost: $165,000 (one-time)
•Technology: Cloud-based inventory management system
•Integration: Existing ERP and MES systems (minimal disruption)

The Results

Financial Impact

Annual savings:$2,200,000

Implementation cost:$165,000

First-year ROI:1,233%

Payback period:0.9 months

Operational Impact

✓Parts stockout rate: 92% reduction
✓Production delays: 85% decrease
✓Warehouse team capacity: 2,400 hours freed
✓Employee turnover: Zero inventory-related departures

Client Quote

"We thought we had a $119K warehouse problem. Turns out, we had a $2.2M production problem. The 6D analysis revealed costs across our entire operation that we never connected to inventory. The GESA solution prevented the cascade from recurring. ROI was undeniable."

— COO, Manufacturing Company

Key Takeaways

1️⃣

Direct costs are just the tip of the iceberg

The $119K labor cost represented only 5.4% of the total impact. The cascade represented 94.6%—unmeasured by traditional analysis.

2️⃣

Measure observable impacts, don't speculate

Every number in our analysis came from actual data: CRM churn rates, exit interviews, receivables aging reports, audit invoices.

3️⃣

Prevention beats reaction

A $165K proactive solution saved $2.2M annually. Reactive firefighting would have continued indefinitely.

4️⃣

18× multipliers are common, not exceptional

This falls within the typical range for manufacturing (15-20×). Inventory issues cascade across entire production operations.

Could You Have an Unmeasured $2.2M Cascade?

Most manufacturing companies do. Book a discovery call to find out.

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The Challenge

Initial Assessment

•2,400 hours/year spent on inventory reconciliation
•$50/hour average fully-loaded labor cost
•$119,000/year direct cost calculated

That's when we applied the 6D Foraging Methodology™.

The Foraging Process

We foraged across all six dimensions, diving deep to discover measurable impacts that surface-level analysis completely missed.

1. Customer Impact

Production delays, expedite fees

$685K

Measured impacts:

• 12% production delay increase due to stockouts (tracked via MES)
• Average customer order value: $95K
• 5 major clients experienced chronic delays
• Expedite fees and rush shipping: $685K annually

2. Employee Impact

Turnover, morale, productivity

$195K

Measured impacts:

• 4 warehouse staff quit in 18 months (exit interviews cited frustration)
• Replacement cost: 1.5× salary ($52K average) = $78K each
• Total: 2.5 turnovers/year × $78K = $195K

3. Revenue Impact

Production downtime, missed orders

$440K

Measured impacts:

• Average production line downtime: 180 hours/year due to parts shortage
• Lost production capacity: $12M potential revenue × 3.6% = $432K
• Late delivery penalties: $8K annually
• Total: $440K opportunity cost

4. Regulatory Impact

Compliance, traceability issues

$98K

Measured impacts:

• Parts traceability audit failures ($35K remediation)
• ISO compliance review additional work ($28K)
• Safety stock verification requirements ($35K)
• Total: $98K annually

5. Quality Impact

Wrong parts, rework, scrap

$252K

Measured impacts:

• Wrong parts installed: 85 incidents/year × $1,800/incident = $153K
• Production rework cycles: $63K annually
• Scrap and obsolescence: $36K
• Total: $252K

6. Operational Impact

Downstream disruption

$411K

Measured impacts:

• Production planning disruption: 950 hours/year × $55/hour = $52K
• Executive time on expedite approvals: 180 hours × $175/hour = $32K
• Engineering time on workarounds: $102K
• Supply chain complexity overhead: $225K
• Total: $411K

Total Annual Impact

Direct Labor Cost:$119,000

Cascading Costs:

Customer Impact$685,000

Employee Impact$195,000

Revenue Impact$440,000

Regulatory Impact$98,000

Quality Impact$252,000

Operational Impact$411,000

Total Annual Impact:$2,200,000

Multiplier Effect: 18×

($2.2M ÷ $119K = 18.5, rounded to 18× for conservative estimate)

The Solution

We designed a GESA (Governed Event Sourcing Architecture) solution to prevent the cascade from recurring:

Event Sourcing Layer

Immutable log of all parts movements, capturing every receipt, transfer, and consumption event before they create discrepancies.

Governance Layer

Automated validation rules preventing stockouts and wrong-part issues. Rules include reorder point automation, parts compatibility verification, and usage pattern anomaly detection.

Intelligence Layer

AI-powered prediction system that learns from historical consumption patterns, flagging potential shortages before production is affected.

Implementation Details

•Timeline: 8-week implementation (design + build + test)
•Cost: $165,000 (one-time)
•Technology: Cloud-based inventory management system
•Integration: Existing ERP and MES systems (minimal disruption)

The Results

Financial Impact

Annual savings:$2,200,000

Implementation cost:$165,000

First-year ROI:1,233%

Payback period:0.9 months

Operational Impact

✓Parts stockout rate: 92% reduction
✓Production delays: 85% decrease
✓Warehouse team capacity: 2,400 hours freed
✓Employee turnover: Zero inventory-related departures

Client Quote

"We thought we had a $119K warehouse problem. Turns out, we had a $2.2M production problem. The 6D analysis revealed costs across our entire operation that we never connected to inventory. The GESA solution prevented the cascade from recurring. ROI was undeniable."

— COO, Manufacturing Company

Key Takeaways

1️⃣

Direct costs are just the tip of the iceberg

The $119K labor cost represented only 5.4% of the total impact. The cascade represented 94.6%—unmeasured by traditional analysis.

2️⃣

Measure observable impacts, don't speculate

Every number in our analysis came from actual data: CRM churn rates, exit interviews, receivables aging reports, audit invoices.

3️⃣

Prevention beats reaction

A $165K proactive solution saved $2.2M annually. Reactive firefighting would have continued indefinitely.

4️⃣

18× multipliers are common, not exceptional

This falls within the typical range for manufacturing (15-20×). Inventory issues cascade across entire production operations.