Transcript Lorem Ipsum

“Best Practices”
Practices “Inventory
“Best
InventoryManagement
Management
Sx Enterprise
How to Set it Up, How to Use it, How to Get Results
ICAMM ICRIG WTERR ICAR
ICAMU
POERR
ICSR
ICRIS ICSW
ICSL
WTERA
ICSD POERA
ICSP
ICIA
 2005 Grant W. Howard Company
Grant W. Howard
13214 Wallace Road
Manchester, MI 48158
(734) 428-0529
[email protected]
1
Today
Day 2 - How to Use it:
The Big Picture (Company and Replenishment)
Overview of the Replenishment Process
How to Use it and How to Get Results:
The Tools - Service and Profits
Proactive Maintenance - Keeping it Correct
Monitoring and Measuring Results - Getting Results
Final Thoughts
 2005 Grant W. Howard Company
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2
The Big Picture
Customers
Employees
Vendors
Profitability
 2005 Grant W. Howard Company
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Inventory Management Objectives
Customer Service
Availability (Fill Rates)
Proper Backorder Handling
On Time Delivery
Accuracy: Item, Quantity, Price
Profitability (ROI)
GM Improvement (Sales and Cost)
Freight Considerations - OC Analysis
Efficiency & Asset Mgt: CtoC and CtoP
Surplus Inventory & Safety Inventory
Turns/Days supply, ROI/T&E/GMROI
Watch the C to C
Watch the C to P
(Warehousing, Handling, Obsol. &
(Purchasing/Replenishment, Receiving &
Shrink, Taxes, Ins, Interest)
Put-away, A/P)
 2005 Grant W. Howard Company
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Order Point:
•Usage Buckets
•Usage Method
•Trending
•Path/Roll up
•LT Buckets
•LT Method
•Safety Method
•OP Adjusters
To Be a Profitable Company Forever
Availability, BO Handling, Accuracy, OTD
Sales, Cogs, Freight, C to C, C to P
Maintenance
Line Point:
•Target & Type
•RC/OC/XF
•Calc. or Manual
EOQ:
•“K” and “R” Cost
•Min and Max
When to
Replenish?
Surplus Points:
•Internal (LP+EOQ)
•External (X months)
Time Line:
•Too Late
•Too Early
•Days Supply
•Promise Dates
Level:
•On-hand
•Committed
•Incoming
Misc:
•Status
•Freeze
•Usage Method, Path
•Replenishment Method
Replenishment:
Items to Replenish:
•Below OP - Must
•Below LP - Include
Order Quantity:
•LP - Level
•SOQ (EOQ/Class)
•Minimum Run
•Package Quantities
Priority
Meeting Targets
EB Logic
External Surplus
Measurement
 2005 Grant W. Howard Company
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Profitability, Asset
Management, and
Efficiency
“Getting Results”
Better Tools
 2005 Grant W. Howard Company
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Measurement
Data to Info
Data
Usage - OE/WT
Fill Rate, BO’s
Turns, Excess, Mix
T&E, GMROI
The Numbers
Level/PNA Info OH & Paperfloat
Hits/Ranking
Purch Hist
Order Cycle
“Smart” Set-up
Ave Usage,
Safety, OP, LP,
Order Quantity
Product Master
Product Whse.
Items BOP/Priority
Timeline Analysis
Too Late
Too Early
Surplus Inventory
Co. and Whse.
Product Pline
Replenishment
Buyer’s Ctrl Center
Lead Time PO/WT
Set-up
The Tools
Maintenance
One Stop Inq/Maint
External/Lng. Term
Internal/St. Term
Proofs/Mass Update
Exc Control Center
 2005 Grant W. Howard Company
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The Tools
Improving Profits, Longevity and Growth
Service/Replenishment

Replenishment - BOP, BLP, Suggested
WT:
– Purchase Priority/BCC
– Drill Down/Maintenance
– Making Targets Properly

Surplus/Excess Inventory


Time Line Analysis “Too Early” Prevention
Surplus Identification - Short/Internal
and Long/External
Time Line Analysis “Too Late”
Proactive Maintenance
Measurement and Monitoring
 2005 Grant W. Howard Company
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Replenishment
Service


Profits
What is the objective, where on the spectrum? Do your people understand
this? Have you given them the tools, processes and education to do it? Do
they know how to accomplish it?
Service/When:
– Service: Below Order Point Trigger
– Profits/Cost: Target and/or Timeframe Trigger

Profits/What and How Much:
– Wait: Still a decision if notified - Costs vs Service
– Fill In: Time left in RC
– Target: Change RC to meet target

The Key is to “Make Today Work” without “Breaking Tomorrow”
Balance Every Replenishment
2005 Grant W. Howard Company
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Buyer’s Control Center/Workbench
On-line, Priorities, One-Stop,
Drill Down, Maintenance, Targets
 2005 Grant W. Howard Company
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Making Targets Properly
Cost to Carry vs Freight,
Price, and Service:



General rules of thumb:

Key is equal days supply
Increase or Decrease
Use for Meeting Targets and
Emergency Fill-ins
x


x
x
x
x
x
x
Line
Point
Days
Dollars
1/2 way through OC/RC
x
New line point
after adjusting
review cycle days
x
x
Order
Point
x
x
x
x
Safety
Stock
Out of
Stock
x = Products in Product Line
 2005 Grant W. Howard Company
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Discounts and Price Increases
$C to C
$Discount/Increase
Break Even
Max. Potential
Quantity
Break Even (Days) =
(2 x Discount% / Monthly C to C) x 30
Maximum Potential Savings (Days) =
This is total days supply to
have on the shelve, not to
buy. Use the “up to vendor
target logic*” (change order
cycle days) to meet the days
supply.
*This method works well for periods
less than 90 days supply (seasonal or
large swing items - be careful).
Be aware of future freight, minimum
considerations, fill ins, NS and OAN
items. If targets are involved, be sure
to fill in the entire line not just the fast
movers or work a deal.
(Discount% / Monthly C to C) x 30
 2005 Grant W. Howard Company
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Time Line Analysis
Too Late
Too Early
0/- days
Out
0-30 days
In
Incoming and will be
late
30/+ days
Out
Out
Incoming and will be
early or not needed
Identification and Prevention are the Key
 2005 Grant W. Howard Company
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Surplus Inventory
CONTINUOUS
Responsibility
 2005 Grant W. Howard Company
Prevention
Identification
Disposition
Goals/Plan
Coordination
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Long & Short Term Surplus

Short Term/Internal (EB, GAP):
Surplus = Available > LP + EOQ

Long Term/External (Take Action, Gone):
Surplus = Available > X Months Usage*

Smart Logic:
1. Frozen or LP + EOQ > X Mth.Usg: Avail > LP + EOQ
2. Order as Needed, N/S, Discontinued: Avail
3. New Items: No Surplus
*X Months Usage is calculated as
“12 months usage/12 x X months”
 2005 Grant W. Howard Company
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Surplus Inventory Disposition
BOP/GAP - Put of the fire: Short or Long Term
BLP/Sugg Xfers - Use it where you can: Long Term
Teach branches to use LT first. Don’t borrow stock and put branch in “need”.
Stock Balance: (“X” Months Supply) - With “To” branch approval/Before Buy
Sell Above Cost: Customer, Other Distributor
At Cost: Sell at cost, Return at cost with no charges (freight, restock)
Below Cost: Sell below cost, Return below cost and/or with charges
Sell Above “Write-off” Cost: Garage/Fire Sale, Flea Market, Auction House,
Liquidation House
6. Dump at “Write-off” Cost: Donate, Scrap, Dump
1.
2.
3.
4.
5.
 2005 Grant W. Howard Company
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Inventory Reductions
Understand the Impact Areas:
 Excess and Defective:
–
–
–
–
–
Low
Risk
No one wants or needs
Control the Feelings
Let it Roll, Let it Go
Be Careful - C to C/Mix
Cost of Disposition
Surplus Point
EOQ
Line Point or Max/EOQ
Order Cycle
PNA/Level
Order Point or Min

Line Point and Order Quantity:
– “What” and “How Much”
– Be Careful - C to P Departments

Lead Time
Order Point - Safety Stock:
– “When”
– Be Careful - Customer Service
 2005 Grant W. Howard Company
Safety
High
Risk
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Proactive
Maintenance
Keeping it Working
 2005 Grant W. Howard Company
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Measurement
Data to Info
Data
Usage - OE/WT
Fill Rate, BO’s
Turns, Excess, Mix
T&E, GMROI
The Numbers
Level/PNA Info OH & Paperfloat
Hits/Ranking
Purch Hist
Order Cycle
“Smart” Set-up
Ave Usage,
Safety, OP, LP,
Order Quantity
Product Master
Product Whse.
Items BOP/Priority
Timeline Analysis
Too Late
Too Early
Surplus Inventory
Co. and Whse.
Product Pline
Replenishment
Buyer’s Ctrl Center
Lead Time PO/WT
Set-up
The Tools
Maintenance
One Stop Inq/Maint
External/Lng. Term
Internal/St. Term
Proofs/Mass Update
Exc Control Center
 2005 Grant W. Howard Company
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Service and Profit - A Quick Method
Hits
H
H
L
L
Cost
L
H
L
H
 2005 Grant W. Howard Company
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How it All Works
“The 10 KEY’s to Proactive Fixing”


Good proofing reports (Pline, Product) - Get a clean start
If change a quantity, remove a line, add a line - Do the maintenance

If items BOP or Gap before expected and not an exception spike or
adjustment - Do the maintenance

Good company understanding and Eyes and Ears with communication

Good exception reports are a must!

Use Hits and Cost logic to review,to prioritize, and for action
Order Point
Line Point
1. AMD/U
4. OC/RC/XC
2. ALT
3. Safety Stock
 2005 Grant W. Howard Company
Stock Level
Four More
5. On-hands
6. Paperfloat
7. SOQ/EOQ
8. Status
9. Paths
10. Freeze/Tmins
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Product Line Proof Report
 2005 Grant W. Howard Company
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Product Proof Report
 2005 Grant W. Howard Company
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Exceptions
 2005 Grant W. Howard Company
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Monitoring and
Measuring
Getting Results!
 2005 Grant W. Howard Company
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Measurement
Data to Info
Data
Usage - OE/WT
Fill Rate, BO’s
Turns, Excess, Mix
T&E, GMROI
The Numbers
Level/PNA Info OH & Paperfloat
Hits/Ranking
Purch Hist
Order Cycle
“Smart” Set-up
Ave Usage,
Safety, OP, LP,
Order Quantity
Product Master
Product Whse.
Items BOP/Priority
Timeline Analysis
Too Late
Too Early
Surplus Inventory
Co. and Whse.
Product Pline
Replenishment
Buyer’s Ctrl Center
Lead Time PO/WT
Set-up
The Tools
Maintenance
One Stop Inq/Maint
External/Lng. Term
Internal/St. Term
Proofs/Mass Update
Exc Control Center
 2005 Grant W. Howard Company
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Measure Results
Customer Service:



Availability
Safety Analysis
Accuracy:
–
–
–
–



Profits and ROI:



Actual and Billing
Product (CM%)
Quantity (CM%)
Price (CM%)
On-Time-Delivery
Backorder Handling
Customer Defection
T&E/GMROI - ROI
Surplus - Prevention &
Disposition
RC/OC/XC and OQ:
– Freight Dollars - As
percentage of sales
– Turns - Really C to C
and C to P

Safety Analysis
Vendors? Employees? Efficiency? Accuracy?
Do better on both sides!
 2005 Grant W. Howard Company
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Vendor Performance and Negotiations It’s not just Price





Lower COGS
Lower Freight Minimums
Multiple Drops for Freight
Combined P/O’s for Minimum
Freight Paid Fill-ins



RGA’s on New Items
Excess Inventory Returns

Win/Win - Partnership





Fill Rates
Consistent Lead Times and OTD
Accurate Shipping (Blanket
Receiving) - Product, Quantity,
Price
Good Backorder Handling
 2005 Grant W. Howard Company
EDI/VMI/2-Way Information
Flow - B2B
Automated Product and
Pricing Updates
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Final Thoughts
AWOA W
 2005 Grant W. Howard Company
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“Better Numbers and Tools” Top 10
Better Numbers:
Better Tools:
1. Hits based Ranking
2. Smart Set-Up and
Maintenance
3. Usage: Lost Sales and
Exceptional Sales, Seasonal
Trending, and Roll Up
4. Customer Buying Habits
5. RC and EOQ Control and Depth
1. Paperfloat Control
2. Buyer’s Priority, Targets
Properly/Equal Days
Supply, and One-Stop
3. Timeline Analysis “Too
Late” and “Too Early”
4. Long Term Surplus
5. Exception Control Center
and Mass Update
 2005 Grant W. Howard Company
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Getting Results - Top 10
Service
Profits
Improved Availability/Service:
Improved Profitability:
1. Order Point
1. Line Point and Order Quantity
2. Stock Level
2. Stock Level
3. “When” to Replenish
3. “What & How Much” to Replenish
4. Stock Out/Lost Business Prevention Timeline Analysis -”Too Late”
4. Surplus Prevention - Timeline
Analysis -”Too Early”
5. Closed-loop Backorder Process
5. Inventory Reduction Program
 2005 Grant W. Howard Company
Most “talk about” 1 and 2, Many do not
understand 3 and Few do 4 and 5
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“ Better Results” - Top 10
Service
Profits
Improved Availability/Service:
Improved Profitability:
1. Accurate Order Point:
1. Accurate Line Point and Order Quantity:
–
–
–
–
–
Track Lost Business
Usage Roll Up
Seasonal Trending
Customer Buying Habits
Lead Time and Safety Considerations
2. Accurate Stock Level: OH and Paperfloat
3. Understand “When”:
–
–
Replenish at Order Point
Use Priority Reporting
4. Stock Out/Lost Business Prevention Timeline Analysis -”Too Late”
5. Closed-loop Backorder Process
 2005 Grant W. Howard Company
–
–
–
–
Track Exceptional Business/Usage
Seasonal Trending
RC and OQ Understanding & Use
CtoC and CtoP, RC/OQ Controls
2. Accurate Stock Level: OH and Paperfloat
3. Understand “What & How Much”:
–
–
–
Line Point, Order Quantity, Package
Understand Fill Ins vs Line Buys
Meeting Targets Properly
4. Surplus Prevention - Timeline Analysis -”Too
Early”
5. Inventory Reduction:
–
–
–
Surplus/Excess Reduction
OC/RC/OQ Reduction - Caution
Safety Reduction - Caution
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Measurement
Data to Info
Data
Usage - OE/WT
Fill Rate, BO’s
Turns, Excess, Mix
T&E, GMROI
The Numbers
Level/PNA Info OH & Paperfloat
Hits/Ranking
Purch Hist
Order Cycle
“Smart” Set-up
Ave Usage,
Safety, OP, LP,
Order Quantity
Product Master
Product Whse.
Items BOP/Priority
Timeline Analysis
Too Late
Too Early
Surplus Inventory
Co. and Whse.
Product Pline
Replenishment
Buyer’s Ctrl Center
Lead Time PO/WT
Set-up
The Tools
Maintenance
One Stop Inq/Maint
External/Lng. Term
Internal/St. Term
Proofs/Mass Update
Exc Control Center
 2005 Grant W. Howard Company
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Inventory Management
10 Step Process
The Numbers:
The Tools - Inventory Management:
1. Parameters/Setup:
5. Replenishment:
–
–
–
–
–
“Smart”
Company/Warehouse
Product Line
Product Master
Product Warehouse
–
–
–
6. Timeline Analysis:
–
–
2. Data Collection:
–
–
–
–
Usage
Lead Time
Level: On-hand and Paperfloat
Purchasing History
3. Forecasting:
–
–
–
Rank
Replenishment Cycle
Usage, LT, Safety, Order Point, Line Point,
Surplus Point, Order Quantity
4. Stock Level Accuracy:
–
–
On-hand
Paperfloat
Use Priority Reporting
Purchases
Transfers
“Too Late”
“Too Early”
7. Excess/Surplus:
–
–
Prevention
Disposition
The Tools - Getting Results:
8. Proactive Maintenance:
–
–
While Replenishing
Exceptions and Mass Updates
9. Measurement and Improvement:
–
–
–
Fill Rates, BO, OTD, Accuracy
Inventory Mix (Safety, Excess, Defective)
Turns and ROI (GMROI and/or T&E)
10. CONTROLLED REPLENISHMENT
 2005 Grant W. Howard Company
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“B2B”
What is
not
needed?
Surplus Point
EOQ
What to
replenish and
How Much?
Line Point or Max/EOQ
When to
Replenish?
Order
Cycle
PNA/Level
Order Point or Min
Lead
Time
Safety
Too Late
Too Early
0/- days
Out
In
What is incoming
and will be late?
 2005 Grant W. Howard Company
0-30 days
30/+ days
Out
Out
What is incoming
and will be early
or not needed?
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The Foundation
 2005 Grant W. Howard Company
Plan of Improvement
Back to Basics
Proactive versus Reactive
Replace Inventory With Information
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“Best Practices”



Better Numbers - (OP, LP, OQ)
Hits and “Smart” Item Ranking
“Smart” Parameters and Controls
Usage Data and Calculation
Improvements (Cornerstone)
–
–
–
–


Lost Sales Tracking
Usage Control Window by Rank
Seasonal Trending
Transfer Usage History vs. Roll
up
–
–
–
–
–
Priority
Targets
“Smart” Rounding
Drill Down/Maintenance
Proper combination of the three
models and use of EOQ
– “One-stop” Thinking



“Smart” Surplus - “True” Surplus
Exception Control Center - ECC
– “Smart” exception reporting
– Mass Update
– “One-stop” thinking
Customer Buying Habits and
“Automated” Overrides
 2005 Grant W. Howard Company
Time Line Analysis
– “Too Late”
– “Too Early”
Lead Time Improvements
Safety Stock Improvements
– Safety Control by Rank
– Safety Control by Lead times
– Safety Analysis


Better Tools
Buyer’s Control Center - BCC

Measurement and Monitoring
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“Best Practices”


Better Numbers - (OP, LP, OQ)
Advance Lead Time on Seasonal,
Forward and Trend item usage
calculation
Review Cycle Improvements:



– Based on Purch or Ext AMU
– Min, Max and Exception
– WT Cycle Days

–
–
–
–
Order Quantity Improvements:
– Controls and Depth:
»
»
»
»
Vendor vs Transfer (ARP)
Min and Max Weeks
Calculate but do not use
R and K Cost
 2005 Grant W. Howard Company
Better Tools
Rank added throughout system
Rounding Control and Smart WT
Rounding
Three buying methods and WT’s:

LP with or without OQ
WT Cycle and Set weeks supply
Full control and Works together
Proper products, Proper
quantities
Paperfloat Control:
– Orders, PO’s and WT’s
– Summary and Detail/Drill Down
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GWHCO
www.gwhco.org
Grant Howard:
[email protected]
734-428-0529 Phone
734-428-0593 Fax
John Cason:
[email protected]
256-830-0676 Phone
256-830-0481 Fax
 2005 Grant W. Howard Company
Our approach involves tailoring the
best practices in distribution to the
specific needs of our clients. Our
working philosophy revolves
around building a strong and selfmaintaining infrastructure by
developing a working plan based
on processes and procedures,
education and understanding,
implementation of tools and
technology; and through
communication, organizational
structure and team environments.
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