Government Surplus Auctioneer Realizes $7.6M in Annualized Cost Savings and SOX Compliance Through Inventory Management Controls

A recognized leader in online government surplus equipment auctions, with two central US warehousing locations.

$7.6M

annualized cost savings

SOX

compliance acheived

Challenge

Following acquisition from a publicly traded company, the lack of inventory processes led to large discrepancies between system and physical inventory reports. A significant portion of the inventory was experiencing location-control issues resulting in poor inventory accuracy and working capital problems. As a public company, the deficiencies uncovered also risked SOX compliance in their controls environment.

Discovery

TPG identified the 34 projects across 8 programs to be executed over inventory and resource management that were necessary to allow the business to scale as required:

Inventory Accuracy Remediation and Operational Controls – Introduced automation to reduce processing time and mitigate manual errors. Introduced cycle counting program to increase control and accuracy of inventory quantities and locations.
Financial Reporting Automation – Reduced manual processes for financial reporting to reduce lead time and increase report accuracy and SOX compliance.
Controlled transactions on receipts, sales, transfer, and adjustments; validated inventory with a SSOT; verified system dependencies; created a Business Improvement team to sustain improvements made.
Other value-add initiatives including Receiving Process Enhancements; warehouse re-layout; IT ticket prioritization; business continuity planning; online health checks dashboard

Value Created

TPG worked together with the client to increase inventory accuracy, re-implementing SOX compliant location controls and transaction controls, and a cycle count program to sustain the following results:

$7.67 in annualized cost savings
Recovery of $22.2M in working capital from inventory discrepancies
SOX compliance on inventory controls – mitigating potential audit scrutiny risks
Increased capacity for additional governmental contracts without increasing labor

Figure 1: Inaccurate Inventory
Count (millions $USD)