(331) SX.e WebUI Advanced Inventory Management: 10 Steps to Best Practices Inventory Management PDF Free Download
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(331) SX.e WebUI Advanced
Inventory Management
10 Steps to Best Practices Inventory Management
Grant Howard, Grant W. Howard Company
Manchester, Michigan
2
“Getting Results” -Taking Profits, Longevity, Growth and Responsibility to the Next Level
Authority on “Best Practices” Inventory Management, Operational Efficiency, Systems Utilization
Wholesale Distribution Degree, Many Years of Experience
Works with Multiple Distributors, Associations and Software Systems, 80% of Time at
Distributors On-site
Inventory Management, Operations and Systems Workshops/Conferences
Multiple Boards of Directors and Advisor Boards
Conceptual Designer Behind Infor’s SX.e, FACTS and A+ Advanced Inventory Management “AIM”
and other ERP Platforms
Software Development, Enhancements and Specification/Design Work
Our Expertise is “Best Practices” -Improving and Implementing Proven Practices that Work and
Drive Results -Profits, Longevity and Growth
PLGR, MOT, PEM, PET, ACE
Grant Howard and GWHCO
10 Steps to Best Practices Inventory Management
“Set Up, Utilization, Maintenance and
Driving Results”
The Big Picture
Inventory Management and
Replenishment
The 10 Steps to BPIM*
Better Numbers -Steps 1-4
Better Tools -Steps 5-7
Driving Results -Steps 8-10
Take it Back
* Companies have Difficulty with Set Up (1),
Replenishment (5), Proactive Maintenance (8)
and Measurement (9) (Steps 1, 5, 8 and 9)
Company Objectives
The Big Picture
Customer Service
Availability
On-Time Delivery
Accuracy
Product
Quantity
Price
Other
Issue Resolution
Fair Price
Profitability
Revenue Generation
and Optimization
Strategic Sourcing
Margin Improvement
Costs Reduction:
Freight –In, Out, Inter Co.
Cost of Transactions – 4x
Cost of Assets –Inv&A/R
Cost of Errors/Fires
Admin and Other Costs
P
R
O
C
U
R
E
S
A
L
E
S
W
H
S
E
&
V
A
Company Objectives
Profitability, Longevity and Growth
Inventory Management
and Replenishment
The Replenishment Model
The Replenishment Model addresses
the two objectives of
Customer Service and Profitability
When to Replenish?
What to Replenish and How Much?
What is Not Needed?
The Replenishment System
PNA/Level
Surplus Point
Line Point or Max
Order Point or Min
EOQ
Order/Replenishment
Cycle
Lead Time
Safety
When, What, How
Much? What is
Not Needed?
Addresses the
Objectives of
Service and Profits
What to
Replenish and
How Much?
Freight
C to C
C to P
When to
Replenish?
Fill Rate
What is Not
Needed?
C to C
Fill Rate
Usage and Lead Time
Order Cycle and EOQ
Stock Level and Dates
Surplus ($ Working)
“10 Steps”
Best Practices
Inventory Management
Systematic approaches are 90% of stellar customer service
at the lowest cost… The key is to devise systems that allow
you to give the customers what they want every time;
accurately, consistently and efficiently.
If you fix the system, the problem is eliminated for good.
Is it stock? Should it be? Is it time to replenish? How long
has it been here? How many should we have? If your
inventory system can’t answer these questions, you’re
making your job of providing customer service at the lowest
cost to serve a lot harder than it has to be.
9. Measurement and Monitoring
10. Controlled Replenishment and Maintenance
1. Parameters
2. Usage and Lead Time
3. Forecasting
4. Stock Level/PNA
5. Replenishment
6. TimeLine Analysis
7. Inventory Optimization
8. Proactive Maintenance
“Best Practices” Inventory Management –10 Steps
Surplus Point
Line Point or Max
Order Point or Min
Safety Stock
Usage during Lead Time
Usage during Order Cycle
Economic Order Quantity
PNA
Better Numbers
Set Up, Data, Forecasting
and PNA Accuracy
Steps 1-4
Step 1: Parameters and Set Up
Dynamic, Smart and Multi-Level
Set Up and Parameter Maintenance
is Continuous and Ongoing. Not Just
at Start:
The World is Dynamic, Things Change
New Items at Beginning vs. Once
Established
Implement Smart Product Ranking
Dynamic –Use Hit rank or similar –
Not all items are the same
Smart – Allows balance between
Profits and Service, Hits and Cost,
Return vs. Cost/Time (Exception
reports)
Multi-Level –Company, Warehouse,
Vendor, Pline, Item/Warehouse
By Path – Vendor or Internal Source
ICSR –The Big Picture (WebUI)
ICSR –Ranking (WebUI)
Product Ranking is Critical for:
“Smart” Parameter Maintenance
Good Exception Reporting
Good Analysis/Priority Reporting
ICSR –Ranking, Detail Ranks (WebUI)
“Smart Set Up”
Rank based on Hits
Usage:
Months Based on Rank
Seasonal Trending
Lead Times:
Min/Max by ARP
Calculation Method
Exception Reporting
Safety Stock:
Based on Rank
Ability to Utilize LT (% vs. Days)
Safety Analysis
Order Point Adjusters:
ASQ and 5Hi
Summary Analysis Inquiry
Full RC/XC and EOQ Control
Buyer’s Control Center:
Priority Setting
Color Scheme Setting
Exception Control Center:
Tmins with Low Activity
Tmins to Expire
Products about to Unfreeze
OAN, FC99, DNR with Hits
Smart Transfer Rounding
Step 2: Data Collection and Correction
Usage Buckets: Sales, Transfers, Lost
Sales, Exceptional Sales, and
Manual/Automated Overrides
Lead Time Buckets: P/Os, Transfers,
and Manual Overrides
Where Does Most of this Data Come From?
Sales/Transfer History
Lost Sales
Exceptional Sales/Xfer
Human Input
Usage/Demand
Step 3: Forecasting
Product Ranking
Reset Dynamic Parameters
Average Usage/Demand
Review/Order/Transfer Cycle
Safety, Order Point, Line Point, EOQ
Exception Center Reporting
Step 4: Stock Level/PNA
On-hand Integrity –PET, WMS, CC’s :
By the Way you do Things -PET
Cycle Counts/Suggested Counts
Warehouse Management System
Paperfloat Control:
Open Doc Control Center
Proper Dates
Daily
On-Hand
-Committed
Available
On-Hand
-Committed
+ Incoming
Stock Level/PNA
1. Parameters
2. Usage and Lead Time
3. Forecasting
4. Stock Level/PNA
“Best Practices” Inventory Management –10 Steps
Surplus Point
Line Point or Max
Order Point or Min
Safety Stock
Usage during Lead Time
Usage during Order Cycle
Economic Order Quantity
PNA
Better Tools
Replenishment, Timeline
and Inventory
Optimization
Steps 5-7
Inventory Management
is at the Time of
Replenishment...
“When, What, and How
Much”
Everything Else is
Inventory Correction.
Step 5: Replenishment
PNA/Level
Surplus Point
Line Point or Max/EOQ
Order Point or Min
EOQ
Order Cycle
Lead Time
Safety
When to Replenish
$PO $Target* Replenish (Y/N) WBOP
$1,263 $1,000
$694 $2,500
Order Cycle Days Last Line Buy Replenish (Y/N) WBOP
30 36
14 3
* Dollars, Weight, Pieces, Cubes
Replenishment Transactions
Trans/Year Cost/Trans Total Cost
70’s 225.00 50.00
80’s 410.00 40.00
90’s 65.00 30.00
00’s 12 3.00 36.00
10’s 24 2.00 48.00
Xxx 48 1.50 72.00
Xxx 48 0.13 6.24
We have used Technology to Increase the number of Transactions we can do…
We have not done as well at using Technology to Reduce the Cost per Transaction
Order Point
Worthy Items Below OP
Stellar Fill Rate –When
Line Point, EOQ and Rounding
Minimize Freight, Cost to Carry and Cost to Purchase
Improving Profitability –What/How Much
ICSR –Priority (BCC) (WebUI)
POERA – Demand Center (BCC) (WebUI)
On-line, Priorities, One-Stop, Drill
Down, Maintenance, Targets
POERA – Demand Center (BCC) (WebUI)
Worthy Item Below Order Point or “Hot” Backorder
Utilize Company Long Term Surplus (Please
Take)
Meets Vendor Target –Generate P/O
Below Vendor Target to Target –Meets 1 of 3
Golden Rules –Generate P/O:
1. If you can raise your order cycle by 30 days or less and
meet target
2. Within $1000 Dollars or 20% remaining to target
3. Half way through the Order Cycle
*Use the Meet Vendor Target to do Properly* Remember
the more that you use this tool the less likely you will be
able to do so in the future
Consolidate Plines/Vendors and/or Warehouses
to make Target –Generate P/O
Negotiate Reduced Vendor Target (One Time or
Permanent) – Generate P/O
Cannot Meet Target Buy –Options:
1. Utilize Company Short Term Surplus (Borrow)
2. Find Alternate Source
3. Look for a Substitute to Offer the Customer
4. Assemble/De-assemble
5. Utilize Branch Below Short Term Surplus
(Approval to Take)
6. Ask Customer if they can Wait
7. Direct from Vendor (Pay Freight)
8. Place Short or Emergency Buy P/O (Pay Freight) –
Use the Meet Vendor Target to do Properly
Stellar Customer Experience at the Lowest Cost to Serve
Fill Rate and On-Time
Freight, Cost to Carry and Cost to Purchase
Proper Items and Order Quantity
1. Items Below Line Point Up to Line Point* –Freight and Cost to Carry
2. Compare to EOQ* –Cost to Carry and Cost to Purchase
3. Round to Standard Pack –Cost to Buy/Break Pack
* Assure both objectives, largest of two
Increase/Decrease
Proactive Maintenance
Goes Below Order Point or Too Late before Expected
PNA Change
On-hand Change –OE,WT, WO, PO, Stock Adjust
Committed/Incoming Change –OE, WT, WO, PO
Stock/OAN Flag and ARP Correct
Usage*:
Usage Buckets Correct –Lost Sale, Exceptional Sale,
Correction, Smoothing
Usage Method: Backwards or Seasonal
Trending Issues if Seasonal
Status/ARP Correct for Roll Up
Lead Time
Safety
Order Point Adjusters (Calc, T.Min.OP, ASQ, 5HI)
Order Cycle and EOQ (Not Ordering Enough)
Self-Inflicted:
Utilizing Increase/Decrease Too Often/Incorrectly
doing Proactive Maintenance
Not Ordering Enough Last Time (System or Emotional)
Waiting Too Long
Notes:
Remember: Hits and Cost
80% of Time will be Usage or PNA Shift
Monthly Ratchet caused by Monthly Usage Buckets
* If Usage is Low; Waits Too Long (OP) and Does NOT
Order Enough (LP and EOQ)
If the wrong quantity is ordered
and/or the item is not addressed
then the issue is not resolved.
Stellar Customer Experience at the Lowest Cost to Serve
Priority –Customer Experience vs. Total Cost
Worthy Item Below Order Point –Customer Experience
Correct Order Quantity –Assures until Next Replenishment and
Minimized Total Cost
Meeting Target – Increase/Decrease
Item Below Order Point Before Expected/Broken –Fix It
Step 6: Time Line Analysis
Identification and Prevention are the Key
Out
0-30 days
In Out
30/+ days
Too Early
Incoming and will be
early or not needed
Out
Incoming and will be
late
0/-days
Too Late
PNA/Level
Surplus Point
Line Point or Max/EOQ
Order Point or Min
EOQ
Order Cycle
Lead Time
Safety
Step 7: The Proper Way to Turns and ROI
Understand the Impact:
Excess and Defective:
–No one wants or needs
–Formalized Program
–Formalized Goals
Line Point and EOQ/OQ:
–“What” and “How Much”
–Be Careful –Freight, C to C and
C to P Departments
Order Point -Safety Stock:
–“When”
–Be Careful -Customer Service
Low Risk
High Risk
Other Areas for Improvement:
–The Stocking List
–Valid and Reasonable Committed
–Proper use of Future Orders
–Unavailable Inventory
1. Parameters
2. Usage and Lead Time
3. Forecasting
4. Stock Level/PNA
5. Replenishment
6. TimeLine Analysis
7. Inventory Optimization
“Best Practices” Inventory Management –10 Steps
Surplus Point
Line Point or Max
Order Point or Min
Safety Stock
Usage during Lead Time
Usage during Order Cycle
Economic Order Quantity
PNA
Driving Results
Proactive Maintenance,
Measurement and
Controlled Replenishment
Steps 8-10
Step 8 –Proactive Maintenance (ICAMU)
1. OAN/DNR/Non-Replenished/NS* with Hits
2. Usage Trending Exceptions (If Seasonal)
3. T.Min Usage to Expire (FACTS)
4. Lead Time Exceptions
5. T.Min Order Point to Expire
6. Stock Out/Low/Exceptional Usage (If Utilizing)
7. Freeze to Expire (If Utilizing)
8. ASQ/5Hi Exceptions
9. T.Min Order Point with Low Activity
10. Safety Analysis
Use Hits and Cost:
Priority, Customer
Importance and Cost
of Investment
If there is no measurement, then it
is all hearsay. Data-free
conversations and decisions will
cause lots of frustrations, cost lots
of money and result in lots of
disappointments...
Step 9: Measurement
Exceptions and
Improvement
Long Term Surplus
ICRIS
TQM
Summary and Detail Credits
SMRL
Margin Exception and
Price Optimization
OEER
Customer Experience
ICRIF
Inventory Turns
ICRIT
Measurement –Sun
Measurement –Compass
This is the Monthly Meeting
Measurement –GPS (GFT)
Additional Information:
Freight Spend (In, Inter, Out) and %’s
Year End Objective and %Objective
Previous Year Actual and % TY vs. LY
Industry Best and Industry Average
Comparative -Buyer
Inventory Mix by Rank
Uncontrolled Replenishment
and Maintenance Leads to
Uncontrolled Results
Step 10: Controlled Replenishment
Take it Back
9. Measurement and Monitoring
10. Controlled Replenishment and Maintenance
1. Parameters
2. Usage and Lead Time
3. Forecasting
4. Stock Level/PNA
5. Replenishment
6. TimeLine Analysis
7. Inventory Optimization
8. Proactive Maintenance
“Best Practices” Inventory Management –10 Steps
Surplus Point
Line Point or Max
Order Point or Min
Safety Stock
Usage during Lead Time
Usage during Order Cycle
Economic Order Quantity
PNA
Inventory Management 10 Steps –SX.e
Numbers:
1. Parameters/Set Up: ICSR, ICSD, ICSL, ICSP, ICSW
2. Data: OEET, WTET, POET
3. Forecasting: ICAI, ICAR, ICAMM
4. Stock Level Accuracy: WMS, CC’s, BIIS
Tools:
5. Replenishment Process: PO/WTERR, PO/WTERA
6. Timeline Analysis –Too Late and Too Early: ICRIG
7. Inventory Optimization: ICRIS, ICROU, BIIS
Maintenance and Measurement:
8. Proactive Maintenance: POERA, ICAMU, Mass Update
9. Measurement: ICRIF, SMROL, ICRIT, ICRIR
Missing Steps -Missing Results Expectations?
10. Controlled
Replenishment - The
Entire Company
There is Enough Your Company Can’t Control...
“It’s difficult to get a return on your assets,”
he adds. “The more inventory you have, the
more exposure you have to it becoming
dead inventory. That inventory is the only
aspect of the business that is entirely in
your control, and has everything to do with
your success.”
Industrial Distribution
A+ Network Meeting –Discuss AIM on A+, Sunday 10:30am – 11:30am
SX.e AIM Network Meeting –Ask the Expert Panel Discussion, Sunday 1:30pm
FACTS Network Meeting –Inventory Replenishment Q&A, Sunday 3:00pm
(331)
SX.e WebUI Advanced Inventory Management –10 Steps
Monday, 1:30pm – 2:15pm
(161)
ProAdvisor - BI that is Goal-Oriented and Results-Focused
Tuesday 8:00am – 8:45am
(102)
Balanced Objectives, Execution Excellence and Smart Measurement
Tuesday, 1:30pm – 2:15pm
(162)
ProAdvisor – A Closer Look
Tuesday, 2:45pm – 3:30pm
3 Days Best Practices Inventory Management, Novi Michigan
May 12th–14th, 2020
Thank You
