INVETORY INVETORY MANAGEMENTMANAGEMENT

Presented By:Presented By:

Leydi VelezLeydi VelezAhmed Al ShaeefAhmed Al ShaeefHerbert GuerreroHerbert GuerreroJohn Herrera John Herrera

EIN 5346 Logistics Engineering EIN 5346 Logistics Engineering Chapter 9Chapter 9

AgendaAgenda

I.I. Contemporary Approaches to Contemporary Approaches to Managing InventoryManaging Inventory

1.1. Inventory Management SoftwareInventory Management Software

2.2. Vendor-Managed Inventory (VMI)Vendor-Managed Inventory (VMI)

3.3. Just-in-Time (JIT)Just-in-Time (JIT)

4.4. JIT Case StudyJIT Case Study

Inventory Management Inventory Management SoftwareSoftware

Inventory Management Inventory Management SoftwareSoftware

Benefits:Benefits: Eliminate manual inventory management processes

thereby reducing errors and lead time. Provides managers easy access to the numbers that are Provides managers easy access to the numbers that are

needed for reporting and restocking information. needed for reporting and restocking information. Provides complete real-time visibility into demand, Provides complete real-time visibility into demand,

supply, costs and fulfillment measures and trends.supply, costs and fulfillment measures and trends. Significantly improve your relationships with suppliers, Significantly improve your relationships with suppliers,

vendors and partners by providing self service and real-vendors and partners by providing self service and real-time visibility. time visibility.

Improve demand planning/reduce forecast error rate Improve demand planning/reduce forecast error rate Reduce lost sales and backorders Reduce lost sales and backorders Increase inventory turnover Increase inventory turnover Manage large numbers of styles and SKUs efficiently and Manage large numbers of styles and SKUs efficiently and

accurately accurately Improve management understanding of forecasting and Improve management understanding of forecasting and

inventory management process and performance inventory management process and performance Increase sales and profitsIncrease sales and profits

Benefits Continued:Benefits Continued:

Inventory Management Inventory Management SoftwareSoftware

Inventory Management SoftwareInventory Management Software

inFlowinFlow

1. Sales – Sales Orders and Customer Information

2. Purchasing – Purchase Orders and Vendor Information

3. Inventory – Product Information, Stock Quantities, Stock Adjustments, etc.

4. Reports – Reports offered by inFlow to gather and share information

Inventory software for small to mid-sized businesses. divided up into four main modules:

http://www.inflowinventory.com/

Download options:Free Edition, Regular Edition ($299/license), Premium Edition ($499/license)

Software development company providing Inventory Control Software for 3PL Public Warehouses, Manufacturers, and Distributors.

Inventory Control TrackerInventory Control TrackerTMTM

1.Inventory records are updated automatically2.Notifications (reaching expiration date)3.Multiple warehouse tracking4.Track items by item #, lot #, production code, date, carrier, consignee.

Traker Systems Traker Systems

http://www.trakersystems.com

Editions: 3PL Public Warehousing Edition, Manufacturing & Distribution Edition, Lite Edition

Inventory Management SoftwareInventory Management Software

FishBowl InventoryFishBowl InventoryInventory Management system for small to medium-sized companies that integrates with Quickbooks.

Features:1.Multi-location inventory tracking2.Manufacturing3.Part Tracking4.Unit of measure5.Drop shipping6.Bar coding7.Credit card processing8.Variable pricing and discounting9.Order picking10.Kitting

www.fishbowlinventory.com

Inventory Management SoftwareInventory Management Software

AdvanceWare Technologies, AdvanceWare Technologies, AdvancePro Inventory AdvancePro Inventory

http://www.advanceware.nethttp://www.advanceware.net

NetSuiteNetSuitehttp://www.netsuite.com/portal/products/netsuite/supply-inventory/http://www.netsuite.com/portal/products/netsuite/supply-inventory/

main.shtmlmain.shtml

Direct Tech, Inc. Direct Tech, Inc. Forecast*21Forecast*21 (Inventory forecasting)(Inventory forecasting)

http://www.direct-tech.comhttp://www.direct-tech.com

Inventory Management SoftwareInventory Management Software

Inventory Optimization SoftwareInventory Optimization Software Mincom Critical Inventory Optimization (MCIO)Mincom Critical Inventory Optimization (MCIO) is is

an intelligent, predictive software solution that identifies an intelligent, predictive software solution that identifies the optimal holdings of every stock item based on usage the optimal holdings of every stock item based on usage patterns and criticality. MCIO automatically analyzes and patterns and criticality. MCIO automatically analyzes and adjusts stock levels and reordering requirements on an adjusts stock levels and reordering requirements on an ongoing basis.ongoing basis.

SmartOps Enterprise Inventory Optimization (EIO) SmartOps Enterprise Inventory Optimization (EIO) is is a comprehensive suite of software modules that enables a comprehensive suite of software modules that enables organizations to plan and manage inventories across global organizations to plan and manage inventories across global supply chains. SmartOps EIO encapsulates sophisticated, supply chains. SmartOps EIO encapsulates sophisticated, proprietary algorithms into software that integrates with proprietary algorithms into software that integrates with enterprise planning systems and handles large-scale, enterprise planning systems and handles large-scale, complex supply chains in a dynamic and automated complex supply chains in a dynamic and automated manner.manner.

JDA’s Network & Inventory OptimizationJDA’s Network & Inventory Optimization uses uses deterministic and stochastic optimization combined with deterministic and stochastic optimization combined with flexible user-interface and analytical workbenchesflexible user-interface and analytical workbenches

SmartcorpSmartcorp uses proven forecasting solutions that uses proven forecasting solutions that accurately predict, for each product item, the most likely or accurately predict, for each product item, the most likely or expected value for demand over a given lead time.  The expected value for demand over a given lead time.  The safety stock recommendations and stocking level estimates safety stock recommendations and stocking level estimates that are generated are immediately available for use in that are generated are immediately available for use in other parts of your corporate planning systemother parts of your corporate planning system

Inventory Optimization SoftwareInventory Optimization Software

Vendor-Managed InventoryVendor-Managed Inventory

ChallengeChallenge

Due to increased global Due to increased global complexity, companies are complexity, companies are experiencing long lead times experiencing long lead times and high demand volatility. This and high demand volatility. This has resulted in an increased has resulted in an increased emphasis on managing emphasis on managing inventory. Identifying the best inventory. Identifying the best practices and the best tools to practices and the best tools to accomplish this has become accomplish this has become criticalcritical

Vendor Managed InventoryVendor Managed Inventory

VMI is the process where the supplier generates orders based on mutually agreed objectives and demand information sent by the customer.

Main ActivitiesMain Activities

1.1. Supplier/Vendor has access to customer’s Supplier/Vendor has access to customer’s inventory datainventory data

2.2. Supplier/Vendor is responsible for maintaining Supplier/Vendor is responsible for maintaining the inventory level required by the customerthe inventory level required by the customer

3.3. Supplier/Vendor replenishes inventory via Supplier/Vendor replenishes inventory via scheduled reviewsscheduled reviews

BenefitsBenefits Customer

• Automate Replenishment Automate Replenishment processprocess

• Reduced inventoryReduced inventory• Reduced operating costsReduced operating costs• Focus on core processFocus on core process• IntangiblesIntangibles

Shorter cycle time Greater customer

satisfaction• Avoid stock-outsAvoid stock-outs

Supplier• Increased volumeIncreased volume• Forces disciplinesForces disciplines

Measurements Communication

• Better planning and Better planning and resource useresource use

Visibility via information sharing

• Need to eliminate or Need to eliminate or reduce non-value-added reduce non-value-added activitiesactivities

• Reduce safety-stockReduce safety-stock

How to make it workHow to make it work Clarify expectationsClarify expectations

• How the system will benefit both organizations How the system will benefit both organizations in the long termin the long term

Agree on how to share informationAgree on how to share information• Enough information to maintain a steady flow Enough information to maintain a steady flow

of goods is necessary of goods is necessary Keep communication channels openKeep communication channels open

• Misunderstandings need to be studied as Misunderstandings need to be studied as opportunities for learning and then used to opportunities for learning and then used to avoid repetitive problems in the future avoid repetitive problems in the future

VMI FlowVMI Flow

Performance MeasurementsPerformance Measurements

How to ensure VMI will enhance the business?• Establish measures – identify the goalEstablish measures – identify the goal

Starting number of items vs. expected goalStarting number of items vs. expected goal Inventory $ initially vs. expected goalInventory $ initially vs. expected goal Total inventory $ at start, during, and afterTotal inventory $ at start, during, and after

MeasurementsMeasurements

Operational improvements• Internal

The number of stock outs and duration Cost of material/service before and after

• External Customer satisfaction

• Improvement of delivery availability• Other points as defined by the parties

Competitive advantage considerations

Just-In-Time (JIT)Just-In-Time (JIT)

JUST-IN-TIME (JIT)JUST-IN-TIME (JIT)

JITJIT is originated in Japan as part of the is originated in Japan as part of the Toyota Production System in the approach Toyota Production System in the approach to a Lean Production System.to a Lean Production System.

JITJIT is a strategy that strives to improve a is a strategy that strives to improve a business’s return on investment by business’s return on investment by reducing in-process inventory and reducing in-process inventory and associated carrying cost.associated carrying cost.

JUST-IN-TIMEJUST-IN-TIME JITJIT means making only “what is needed, when it is needed, means making only “what is needed, when it is needed,

and in the amount needed.”and in the amount needed.”

JITJIT supplies “what is needed, when it is needed, and in the supplies “what is needed, when it is needed, and in the amount needed” according to the production plan to amount needed” according to the production plan to eliminate waste, inconsistencies, and unreasonable eliminate waste, inconsistencies, and unreasonable requirements, resulting in improved productivityrequirements, resulting in improved productivity

JITJIT removes inventory to expose production flaws that can removes inventory to expose production flaws that can be corrected or removed in order to improve production be corrected or removed in order to improve production quality and increase efficiency and effectiveness .quality and increase efficiency and effectiveness .

PROGRESSION TO JIT

JUST-IN-TIME EFFECTSJUST-IN-TIME EFFECTS Increase factory response time.Increase factory response time.

Improve customer satisfaction.Improve customer satisfaction.

Build of make-to-order models to eliminate the risk of no being Build of make-to-order models to eliminate the risk of no being sold.sold.

Standardization of parts assemblers increasing product Standardization of parts assemblers increasing product quality.quality.

Reduce setup time allowing the company to reduce or Reduce setup time allowing the company to reduce or eliminate inventory for “change-over” time.eliminate inventory for “change-over” time.

The flow of goods from warehouse to shelves improves by The flow of goods from warehouse to shelves improves by reducing lot sizes to simplify inventory flow and inventory reducing lot sizes to simplify inventory flow and inventory management.management.

JUST-IN-TIME BENEFITSJUST-IN-TIME BENEFITS

Employees with multiple skills are used more Employees with multiple skills are used more efficiently by having the flexibility to move efficiently by having the flexibility to move employees where they are needed.employees where they are needed.

Production schedule and work hour consistency is Production schedule and work hour consistency is synchronized with demand by avoiding paying synchronized with demand by avoiding paying overtime or focus resources to other areas.overtime or focus resources to other areas.

Increase emphasis on supplier relationship.Increase emphasis on supplier relationship.

Supplies comes in at regular intervals through the Supplies comes in at regular intervals through the production day by synchronizing the supply with production day by synchronizing the supply with the demand.the demand.

JUST-IN-TIME LIMITATIONSJUST-IN-TIME LIMITATIONS Preconditions to JIT

• Trust must be present between labor/management as well as suppliers/consumers

• Recognition of processes • Familiarity with problem solving • Quality at the source • Agreement over value and waste

Right Settings • Applicable in growth to maturity phases of Product Life

Cycle • Standard Product • Standard/Fixed Pay-Rate • Problems with Piece-Rate Scheme

JIT operations may leave suppliers and consumers open to supply shocks and large supply or demand changes.

JIT Case StudyJIT Case Study

Stopping Stock Outs with Stopping Stock Outs with Anixter’s Just-in-Time SupplyAnixter’s Just-in-Time Supply

Source: http://www.anixter.com

Case study: AnixterCase study: Anixter Anixter is a leading global supplier of communications and Anixter is a leading global supplier of communications and

security products, electrical and electronic wire and cable, security products, electrical and electronic wire and cable, fasteners and other small components. fasteners and other small components.

They provide innovative They provide innovative supply chain management services supply chain management services to reduce customers' total cost of production and to reduce customers' total cost of production and implementationimplementation

For more than five years, Anixter has developed a For more than five years, Anixter has developed a relationship with a major manufacturer of medical relationship with a major manufacturer of medical equipment. equipment.

Anixter supplies this manufacturer with a variety of Anixter supplies this manufacturer with a variety of fasteners directly delivered to its production facility. The fasteners directly delivered to its production facility. The fasteners are used to build medical equipment from lighting fasteners are used to build medical equipment from lighting and cabinets t electro cardiogram testers and examination and cabinets t electro cardiogram testers and examination tablestables

Case study: AnixterCase study: Anixter

Before Anixter started working with the company, Before Anixter started working with the company, a normal turnaround on the delivery of parts a normal turnaround on the delivery of parts would take a would take a weekweek. .

This slow turnaround increasingly led toThis slow turnaround increasingly led to delivery delivery delaysdelays and and out-of-stockout-of-stock situations to cover for the situations to cover for the delays and stock-outs. On-site inventory levels delays and stock-outs. On-site inventory levels were also increased to cover potential shortages.were also increased to cover potential shortages.

ChallengeChallenge Minimize turnaround on delivered parts.Minimize turnaround on delivered parts.

SolutionSolution Anixter applied Anixter applied Just-In-TimeJust-In-Time supply chain supply chain

with the objective of keeping the required with the objective of keeping the required amount of products on the manufacturing amount of products on the manufacturing floor.floor.

Case study: AnixterCase study: Anixter

Case study: AnixterCase study: Anixter Two manufacturing facilities located in close to Two manufacturing facilities located in close to

each other.each other. More than 2,000 bins placed in sevenMore than 2,000 bins placed in seven

stocking locations spread across the two facilities.stocking locations spread across the two facilities. The company placed between 300 to 800 line The company placed between 300 to 800 line

orders a week. Providing between 900 and 1,000 orders a week. Providing between 900 and 1,000 part numbers.part numbers.

Each of the stocking locations needed to meet a Each of the stocking locations needed to meet a specified min/max range to meet production specified min/max range to meet production goals without overstocking material.goals without overstocking material.

Case study: AnixterCase study: Anixter

Anixter implemented a Anixter implemented a Just-in-Time Just-in-Time program that program that shifted the inventory to Anixter’s distribution shifted the inventory to Anixter’s distribution center to allow for a controlled and planned center to allow for a controlled and planned release of material to the production facilities.release of material to the production facilities.

Anixter established a schedule that allowed the Anixter established a schedule that allowed the Anixter employee to scan the bin levels on a Anixter employee to scan the bin levels on a weekly basis.weekly basis.

During the course of the first year, Anixter During the course of the first year, Anixter worked with the customer to create usage worked with the customer to create usage forecasts.forecasts.

SolutionSolution

Anixter generated weekly usage reports, which Anixter generated weekly usage reports, which created minimum and maximum quantity ranges created minimum and maximum quantity ranges on the used products without risking stock-outs on the used products without risking stock-outs or over-delivery.or over-delivery.

Based on two- to eight-week requirements, Based on two- to eight-week requirements, Anixter successfully worked with the customer to Anixter successfully worked with the customer to reduce the amount of on-hand materials and reduce the amount of on-hand materials and create an efficient just-in-time solution that kept create an efficient just-in-time solution that kept the required amount of products on the the required amount of products on the manufacturing floor.manufacturing floor.

Program ResultsProgram Results Forecasting allowed the manufacturer to gain greater Forecasting allowed the manufacturer to gain greater

control over its inventory and set expectations of the levels control over its inventory and set expectations of the levels of materials that would be kept on the production line and of materials that would be kept on the production line and in its storerooms. in its storerooms.

Instead of everything going through separate steps from a Instead of everything going through separate steps from a buy to expediter to receiver to quality control to builder, buy to expediter to receiver to quality control to builder, everything is handled by Anixter.everything is handled by Anixter.

The manufacturer only had to focus on the building of its The manufacturer only had to focus on the building of its products.products.

The company has set a goal of doubling its profits in five The company has set a goal of doubling its profits in five years. years.

Reducing its supplier base by half. Reducing its supplier base by half. Because of Anixter’s just-in-time program, the supply chain Because of Anixter’s just-in-time program, the supply chain

has built-in flexibility to meet shifting demands.has built-in flexibility to meet shifting demands.

Benefits ObtainedBenefits Obtained

Reduced capital investment in components and Reduced capital investment in components and associated costsassociated costs

Increased facility spaceIncreased facility space Increased efficiency Increased efficiency Improved single point of control for all material Improved single point of control for all material

receiptreceipt Eliminated production line shortages and delaysEliminated production line shortages and delays

Questions ?Questions ?