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JUST IN TIME STOCK REPLENISHMENT

Just In Time CESI Wales 2008. Brian Donnelly/cesi/feb/2008. What is Just In Time Stock Replenishment?. The Just-In-Time (JIT) inventory system is all about having the right goods/products, at the right time, at the right place, and in the exact amount without the safety net of excessive inventory. I

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JUST IN TIME STOCK REPLENISHMENT

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    1. Just In Time CESI Wales 2008 Brian Donnelly/cesi/feb/2008 JUST IN TIME STOCK REPLENISHMENT COMMUNITY EQUIPMENT SERVICES: WALES 2008 Brian Donnelly

    2. Just In Time CESI Wales 2008 Brian Donnelly/cesi/feb/2008 What is Just In Time Stock Replenishment? The Just-In-Time (JIT) inventory system is all about having the right goods/products, at the right time, at the right place, and in the exact amount without the safety net of excessive inventory. It overcomes the need for storing large volumes of stock ‘Just-In-Case’ they are needed.

    3. Just In Time CESI Wales 2008 Brian Donnelly/cesi/feb/2008 How does it work? It requires setting up a contract with a logistics provider (JIT company) to store and deliver equipment as and when needed. An initial list of commonly used equipment (about 80% of equipment usage) is submitted to the J.I.T Company showing the estimated annual usage for each product, together with the suppliers details and product prices etc. The J.I.T Company will then order and store an estimated 4-6 weeks advance supply of stock for each product line.

    4. Just In Time CESI Wales 2008 Brian Donnelly/cesi/feb/2008 How does it work? cont’d… Equipment Stores will hold safety stock for each product – perhaps 2/3 days supply. When equipment falls below the desired safety stock levels a J.I.T order will be made. Stock in the equipment store will generally be replenished from returned equipment which has been recycled, and topped up from the J.I.T company, should there be the requirement to do so.

    5. Just In Time CESI Wales 2008 Brian Donnelly/cesi/feb/2008 How does it work? cont’d… An order will be made via an EDI (Electronic Data Interchange) system direct to the supplier. Orders are captured by a bar-code reading hand-held terminal. Quick communication of the consumption of the old stock triggers new stock to be ordered – this is key to JIT and inventory reduction

    6. Just In Time CESI Wales 2008 Brian Donnelly/cesi/feb/2008 How does it work? cont’d… Equipment services will receive one invoice per month from the J.I.T company. Equipment belongs to the J.I.T company until it has been ordered and delivered to the equipment service. The JIT company will purchase the equipment from the supplier at the prices/contractual arrangements agreed between the supplier and the equipment service. Thus relationships with suppliers are maintained directly by the equipment services.

    7. Just In Time CESI Wales 2008 Brian Donnelly/cesi/feb/2008 How does it work? cont’d… It is important to note that there is a responsibility on the equipment service to: Review stock items regularly, and inform the JIT company of any changes. Review safety stock and reorder levels. Inform the JIT company of any fluctuations in demand e.g. seasonal trends. Manage the performance of the JIT contract by setting acceptable performance levels, and where appropriate include ‘penalty clauses’ for failure to supply.

    8. Just In Time CESI Wales 2008 Brian Donnelly/cesi/feb/2008 Why use Just In Time Stock Replenishment? Massive reduction in capital tied up in stock. J.I.T allows for the continuity of supply, whilst meeting all the demands, without having to be concerned with stock ordering and stock holding, together with the related costs (stock management costs approx 33% of product price). Improved performance indicator levels through reduced supplier lead times, and likelihood of running out of stock minimised.

    9. Just In Time CESI Wales 2008 Brian Donnelly/cesi/feb/2008 J.I.T will allow services to meet current and future activity without having to move to a larger, more expensive, store – note in some cases it may allow large services to come together without having to acquire new premises; Reduction in the deterioration of stock; Reduced administration i.e. one order per day, and one invoice per month; Better utilisation of staff time Why use Just In Time Stock Replenishment? Cont’d…

    10. Just In Time CESI Wales 2008 Brian Donnelly/cesi/feb/2008 Allows services to focus on large complex equipment e.g. Beds and hoists (items outside JIT) Accurate management information through the use of stock reports thus highlighting; supplier performance, and product activity costs; Opportunity to increase range of equipment; Supports Pooled Funding arrangements as different ordering codes can be set up against different budget codes for the purchase of new equipment; Supports CESI initiative by improving delivery of services. Why use Just In Time Stock Replenishment? Cont’d…

    11. Just In Time CESI Wales 2008 Brian Donnelly/cesi/feb/2008 It depends on the value of the contract. Generally the service costs between 10-12% of the value of the items ordered e.g. If equipment ordered in one week is to the value of £1000, the service cost would be £100-£120 Note the service charge is worked as a percentage of the value of the equipment; it would therefore be wise to consider having high volume, low cost items within the contract. How much does Just In Time Stock Replenishment cost?

    12. Just In Time CESI Wales 2008 Brian Donnelly/cesi/feb/2008 Does the Just In Time model present value for money? In principle yes. This has to be considered against different factors including: The size and value of the contract How much the contract is used If reduction in staff time is quantified e.g. there could be up to 30% saving on admin time Cost Avoidance – Does using this contract allow you to: (a) Move to smaller premises (b) Take on additional services without having to move into larger premises

    13. Just In Time CESI Wales 2008 Brian Donnelly/cesi/feb/2008 Does the Just In Time model present value for money? Cont’d… In principle yes. This has to be considered against different factors including: Value of VAT reclaimed by health and social care on a contracted out service If reduction in ‘total absorption costs’ are considered e.g. one invoice per month for finance, and one annual contract for supplies dept. If reduction in stock holding/management cost are quantified (recurrent saving)

    14. Just In Time CESI Wales 2008 Brian Donnelly/cesi/feb/2008 In principle yes. This has to be considered against different factors including: Value of capital released at contract set up (one-off). Note this could be as much as £200K for an average service. Opportunity costs are considered e.g. taking on new services Improved performance – avoiding admissions and ensuring more prompt discharges have a financial benefit attached to them Does the Just In Time model present value for money? Cont’d…

    15. Just In Time CESI Wales 2008 Brian Donnelly/cesi/feb/2008 What are the requirements to get started? Tender service – tender waiver may apply A comprehensive list of products, prices, suppliers details and usage levels Service specification e.g. store location, delivery times and product details Hardware is usually provided by the JIT company e.g. barcode readers

    16. Just In Time CESI Wales 2008 Brian Donnelly/cesi/feb/2008 ???General Questions??? (Q). How long does it take to implement? (A). About 2-3 months following tender (Q). Will our suppliers be happy with this arrangement? (A). Yes, it is a formal arrangement, which suppliers like. Most are aware of the concept. (Q). Are there any disadvantages with this system? (A). Like any contract it has to be well implemented and managed, or inappropriate stock levels can create problems

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