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Lean Inventory … by design

Lean Inventory … by design. www.chitechinc.com (732) 332-1012. Overview. Illustrate a tools-based approach to inventory optimization Use a Distribution Center example Introduce i-Lean Describe the analysis technique and input data Execute sample design General observations.

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Lean Inventory … by design

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  1. Lean Inventory …by design www.chitechinc.com (732) 332-1012

  2. Overview • Illustrate a tools-based approach to inventory optimization • Use a Distribution Center example • Introduce i-Lean • Describe the analysis technique and input data • Execute sample design • General observations

  3. The Challenge • Customer: A video games DC with 20,000 SKU’s • Operations controlled using a WMS with manual overrides • Uses back-of-the envelope SKU slotting techniques – would like to mechanize • Space constrained – would like to eliminate dead stock and manage slow movers • Not particularly concerned about costs

  4. DC Layout

  5. Pick-to-Light Mezzanine

  6. Fast Moving Cartons

  7. Slow Movers/Dead Stock

  8. Bulk Floor Pile

  9. The Lean Solution • Establish & manage lean inventory levels • Reduce material carrying and handling costs • Recommend optimal cycle and safety stock levels along with bin sizes • Identify opportunities to correct both excess and inadequate inventory levels • Optimize existing and planned storage • Slot SKU’s based on cube, demand, picking profile, storage media, affinity using CPOI • Support unlimited “what if’” comparisons of different inventory management strategies.

  10. Project Approach • Work with the primary contractor to gather bulk data from the customer, e.g., SKU information, and derive other reference data • Construct an i-Lean database and validate its content for both its accuracy in representing the physical DC environment and its internal data consistency • Execute basic analyses to identify opportunities • Provide slotting and dead/slow stock recommendations • Provide bin size and replenishment recommendations

  11. Basic Techniques • Apply the (demand x lead time) + safety stock “Pull” model at the SKU level • Optimize SKU flow • Focus on “important” SKU’s first • Optimize bin sizes and storage media types • Apply CPOI slotting strategy (Heskett) • Connect analysis, design, and execution systems

  12. i-Lean Analysis Modes • Design Mode – For “Greenfield” designs with unlimited storage media • Normal Mode – Optimization of SKU placement in limited existing storage media • Central Storage Design – For Reserve storage

  13. Material Handling Flows

  14. SKU data input Template (A)

  15. SKU data input Template (B)

  16. i-Lean Analysis Summary • Operational decisions should be based on data • Getting good data can be (is) tedious • Establishing cost factors is difficult but may be a wake-up call for operational processes • Optimizing material flow may imply radical changes to process and storage strategies • Get rid of dead stock

  17. Other Observations • Tribal knowledge may inhibit change • Circumventing operational systems, e.g., WMS, creates problems • Costs are important • Expecting simple solutions to complex problems may lead to …

  18. Lean Inventory …by design

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