Alrosa Shrinks Work-In-Progress Inventory By 4.3 Million Carats

Alrosa has finalised the interim results of its project to boost its sales division’s performance. Accelerating the pre-sale process in 2018-2021 has helped the company to reduce the amount of diamonds in the work-in-progress inventory by over 4 million carats. This freed up rough diamonds valued at over $300 million for sale.

In 2018, Alrosa began working on accelerating its production processes and reducing its volume of work-in-progress inventories (i.e., diamonds that have left the processing plant but are not yet ready for sale). In three years, the sales division has built an efficient and flexible production management system. This has helped permanently reduce the duration of the pre-sale production cycle by 30-40%, or 15-25 days depending on the type of goods.

As a result of all of the above, the volume of work-in-progress diamonds has decreased by 4.3 million carats by the end of 2021. This has released $320 million from working capital in 2018-2021.

These results were achieved through a number of initiatives, including the automation of sorting and accelerating the journey of rough diamonds to trading sessions. In addition, the launch of a system focused on continuous improvement encouraged staff to constantly evaluate and improve process efficiency.

While implementing the project, the company revised its approach to shipping diamonds – from processing plants to the Diamond Sorting Centre in Mirny, and from there to the United Selling Organization (USO) of Alrosa in Moscow and the Yakutsk Diamond Trading Enterprise.

Evgeny Agureev, Deputy CEO of Alrosa, said: “The project which we started three years ago with a minor overall investment enabled us to greatly reduce the work in progress volumes of diamonds in 2021. This helped us to provide an undersupplied market with the maximum amount of rough diamonds when our clients needed them. Thanks to good teamwork in 2021, we were able to reduce our inventories to a record minimum of 8.4 million carats.

“In addition, whilst implementing the programme, we started actively developing the system for continuous improvement in our sales division. In three years, we have chosen to implement around 300 initiatives, with half of this amount suggested by the sales unit staff itself. We plan to continue encouraging staff initiatives under this system. We will further automate sorting by developing a special software for smart management and process control. We see further potential for improvements in this area which will help driving work-in-progress inventories even lower.”

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