DEFINE

1. Six Sigma Project : OAS – 05 - 007Project Title : OPTIMIZATION OF ENGINEERING STOCK ITEMS CRITICAL TO ADB OPERATIONSChampion : CHATIYA NANTHAM Team Leader : REGINO E. VALDERRAMAMembers :OAFA-FM : William Seril, Leodegario Amba, Rafael Lim, OAIS-LM : Arnold JalandoniContributing Members : George Villamor, Ed De Veyra, Dario Ponciano, Lamberto Geronimo

2. DEFINE Six Sigma Project : OAFA - FM Team Leader : Regino E. Valderrama Team Champion : Chatiya Nantham Members: W. Seril, L. Amba, R. Lim, A. Jalandoni • PROJECT DESCRIPTION: • PROBLEM STATEMENT : Currently, the material (spares, equipment and supplies) inventory is in the region of US $ 1.604 Million and doesn’t give clear indication of critical and non-critical nature and it’s movement (fast, slow and none) and utilization levels. Categorization using matrix system of the inventory based on it’s nature and movement has to be established and improved to control as well as to avoid: • i. Higher inventory costs; • ii. Unnecessary purchases of these materials, and • iii. Unwanted storage spaces in the MMU stores. • GOAL STATEMENT: • Ensure the availability of the correct and required equipments, parts and supplies critical to ADB operations and services. • Reduce the material inventory cost without jeopardizing and compromising the engineering support required to operate and maintain the ADB Engineering facilities and services. A target of 5% reduction in the current non critical and non-essential stock item is considered to be initiated in November 2004 until the 2nd quarter of 2005.

3. DEFINE Six Sigma Project : OAFA - FM Team Leader : Regino E. Valderrama Team Champion : Chatiya Nantham Members: W. Seril, L. Amba, R. Lim, A. Jalandoni • PROJECT DESCRIPTION: • BUSINESS CASE : Over the years, the inventory of engineering supplies, spares and equipment have been monitored but not closely controlled. Therefore, maintaining an optimal level of stocks based on delivery lead times and criticality to ADB operations is useful to effectively support ADB Engineering facilities and at the same time reduce inventory cost without jeopardizing and compromising the quality of service. • PROJECT OBJECTIVES: • i. That the equipment, supplies and spare parts are always available from the store when the need arises, • ii. That the equipment, supplies and spare parts in stock or stored are those that are required to effectively support our daily activities, • iii. That the supplies and spare parts in stock or stored are those required to support equipments and services critical to ADB operations, • iv. That the equipment, supplies and spare parts in stock or store are original, new, usable, not obsolete or expired. • v. That the equipment, supplies and spare parts in stock or stored are meeting ADB’s specifications and standards.

4. PROJECT TEAM CHARTER (Define Phase, item 1) • PROJECT TITLE: Optimization of Critical Engineering Items to ADB Operations. (Ensuring the availability of the correct • and required equipments, parts and supplies critical to ADB operations and services.) • PROBLEM STATEMENT: In thee present material inventory (spare parts, equipment and supplies) system, the following information is not defined: (i) Critical materials; (ii) Non-critical materials; (iii) Stock movement – slow, fast and none; (iv) Utilization level. Lack of this has resulted in (i) a very high inventory cost in the region of US $ 1.604 Million; (ii) material purchases which are only based on replenishment reports without consideration to the critical and non-critical aspects; and (iii) increased storage space. There is no effective inventory management control to ADB’s HQ facilities engineering operation. • GOAL STATEMENT: Reduce the material inventory cost without jeopardizing and compromising the engineering support required to operate and maintain the ADB Engineering facilities and services. A target of 5% reduction is considered to be initiated in November 2004 until the 2nd quarter of 2005 on non critical stock items. • BUSINESS CASE : Over the years, the inventory of engineering supplies, spares and equipment have been monitored but not closely controlled. Therefore, maintaining an optimal level of stocks based on delivery lead times and criticality to ADB operations is useful to effectively support ADB Engineering facilities and at the same time reduce inventory cost without jeopardizing and compromising the quality of service. • PROCESS: • TIME LINE: Having the identified the root causes and effects and the criticality of each equipment, parts and • supplies measured in terms of immediate availability and dependable sources, it is estimated that a reduction of between 5% to 10% of the present inventory level and cost is achievable within a period of one year. • FINANCIAL BENEFITS: US $ 80,000.00 from the 2005 Budget, Internal Administrative Expense is saved. Budget of 2006 is reduced by 7.5% compared to 2005. Sale of the non-moving items classified as disposable can fetch an income of about 15% (US $ 9,000.00) of its original acquisition cost of US $ 60,000 • Members: Jalandoni, Arnold; Seril, William Team Leader: Champion • Amba, Leodegario: Lim, Rafael:Valderrama, Regino E. Cahtiya Nantham, 05 October 2005 Inventory list of 5988 Line items Complete / Correct Item Classifications Stock Items Movements Item Criticality to ADB Operations Start End Budget-Purchase Requests Control Review and monitor Stock Items Disposal of Non- moving Non-critical Stock Items Appendix 11

5. Performance Standards DEFINE Reduction of material inventory cost without jeopardizing and compromising the required engineering support. High Level Need Optimization of Engineering Stocks Critical To ADB Operations Output Unit Output Characteristic ( Big Y ) Classification of Engineering Stock Items critical to ADB Operation and cost reduction without . C T Q The process starts when an urgent request for an immediate engineering services is received, starting with the withdrawal of materials, parts and/or supplies and ends when the services required is completed/accomplished. Project Y ( Little Y ) Measure Within minutes from the occurrence of defect or fault. Completion and accomplishment of an urgent engineering services is measured and dependent on the availability of spares, supplies and equipment critical to ADB Operations. Specification Limits From the current level of 5,996 line items these will be reduced to 843 line items only, no more, no less. USL and LSL = 843 +/- 0 line items. Target Within a period of three years commencing the first quarter of year 2005. Any critical line item going above or beyond the identified 843 critical line items. No reduction within 12 months. Defect No. of Defect opportunities per unit. Absolutely 843 line items + or – zero. Obsolescence of stock item, Failure to conduct physical inventory of critical line items.

6. Stratification Metrix DEFINE Supplier/Source

7. BRAINSTORMING ALL POSSIBLE FACTORS DEFINE Why do we need this so much equipment and spares stored? What contribute to having this much kept in the Engineering Store? STRATIFICATION OUTPUT (Y) FACTORS MEASUREMENTS QUESTIONS ABOUT PROCESS X VARIABLES REPLACEMENT ARE THESE SUPPLIES, BY FUNCTION/PURPOSE SPARE EQUIPMENT AND PARTS NEW INSTALLATION LOCALLY AVAILABLE STAND BY OFF THE SHELVES? BRAND BY SPECS STANDARDIZATION SIZE, CAPACITIES, RATING OPTIMIZATION OF ENGG. SPARES AND EQUIPMENT CRITICAL TO ADB OPERATIONS CAN THESE BE READILY COLOR AVAILABLE FROM SUPPLIERS/ MANUFACTURERS? YRS. W/ EXPIRATION BY STORAGE REQUIREMENT MOS. HI DELICATE DELIVERY, HOW FAST LOW CAN IT BE MADE? ELECTRICAL BY EQUIPMENT TYPE MECHANICAL INSTRUMENTATION BMS/FMS ARE THE LIST OF IMMEDIATE SUPPLIERS, MANUFACTURERS AND ENGG. BY SERVICE SOURCES READILY AVAILABLE? B & G HOUSEKEEPING ARE REPLACEMENT/EQUIVALENT OBSOLETE BY APPLICATION ACCEPTABLE? NEW TECHNOLOGY HIGH BY COST MEDIUM WILL EQUIPMENT STANDARDIZATION (PER PC.-UNIT) LOW CONTRIBUTE TO STOCK REDUCTION? UNNOWN END USER NO MOVEMENT BY MOVEMENT/UTILIZATION UNKNOWN EQUIPMENT FAST MONTHS WILL LONG DELIVERY TIME SLOW YEARS AFFECT EQUIPMENT AND/OR STORAGE LEVEL SYSTEMS OPERATIONS? RE-ORDER POINT (TO REVIEW BASED MAXIMUM ON UTILIZATION) MINIMUM BY USAGE STANDARD DOES DATA EXIST = SPECIAL BIN CARDS YES COST YES REGULAR STOCK (ENGG. STORE) BY SOURCE YEARLY INVENTORY YES LOCALLY AVAILABLE STOCK ITEM INDENT SPECIAL FABRICATION WILL THIS HELP = YES

8. IDENTIFYING 28 Classifications DEFINE What are these stock items? Do we really need these stock items?

9. CAUSES AND EFFECTS (All possible contributors) ANALYZE ORDERING PROCEDURE (RP) PEOPLE O & M SPARES PURPOSE USERS PROJECT AIG DESIGN EXCESS ORDER ABUSE/EXCESS ORDER BUDGET OFF. SHELF AVAILABILTY WRONG SPECIFICATION FABRICATION LOCAL SOURCE STORE CLERK KNOWLEDGE INDENT PROCESSING DELIVERY Availability of Critical stock items NO INVENTORY LISTING EXCESS (DIRECT CHANGE ITEMS) (EXPENSE) DIRECT (TO FULLY UTILIZE) ISSUANCE CONSTRUCTION EXCESS STORE (TURN OVER FROM HQ PROJ.) PROGRAMMED OR PLANNED STOCK ITEM STORAGE WRONG TAGGING OR MARKING PROCESS SAFEKEEPING BUDGET CRITICALITY RECEIVING WRONG SPECS COST REDUCTION PROCESS (INVENTORY) WRONG LOCATION BUDGET POLICIES (STORAGE & RECEIVING) MATERIAL HANDLING From the list above, all indirect causes and effects to be cancelled out through brainstorming.

10. PROCESS MAP :Need for regular stock items (equipment, parts and/or supplies) from the Engg. Store and stock replenishment. PROCESS A DEFINE End Users O A F A - F M START Need for stock item Prepare withdrawal Form/slip Prepare Purchase Requisition End-user prepares withdrawal Follow steps 4 to 8 END 8 BCC, CSC Etc. 2 User receives item and accomplish work 3 END Approval Solicit withdrawal Approval from SEO SEO Head, OAFA-FM Solicit approval of RP by Head, OAFA-FM 1 4 OAFA-FM YES Submit to MMU for stock item issuance Check availability from Engg. Store 5 Advises end user 6 NO MMU-Store Releases stock items Delivery, receive and storage O A I S - P C Forwarded to OAIS- PC for action Canvass, Request for Quote, issue PO Locate possible Source or supplier

11. DEFINE PROCESS MAP :Need for stock items (equipment, parts and/or supplies) for a particular A I G Project. PROCESS B End Users START Need for stock item End-user receives and accept delivery Accomplish and complete project. END O A F A - F M 1 9 9 BCC, CSC Etc. 10 Prepare Purchase Requisition Keep/endorse excess materials in separate store. Approval PR is prepared without checking availability of required parts or stock item from the store. SEO 2 Informal turn-over for safekeeping purposes and unrecorded items. Head, OAFA-FM Solicit approval of RP by Head, OAFA-FM 8 OAFA-FM Advises end user 7 Delivery, receive And storage 3 6 O A I S - P C Forwarded to OAIS- PC for action Canvass, Request for Quote, issue PO 4 5 Locate possible Source or supplier

12. Actions Taken, Application of FMEA MEASURE Six Sigma Project : OAFA - FM Team Leader : Regino E. Valderrama Team Champion : Chatiya Nantham Members: W. Seril, L. Amba, R. Lim A. Jalandoni Failure Mode & Effects Analysis (FMEA) as applied The application of the Failure Mode & Effect Analysis, FMEA, has effectively reinforced the “theory” and identification of the various engineering items classified critical to Asian Development Bank operations. The FMEA shown in the next slide clearly justifies the failure effects and its respective causes of having these critically classified services properly identified and marked.

13. FMEA applied to determine criticality MEASURE Determination of criticality to ADB operations of 28 classification.

14. MEASURE MMU Inventory Cost Composition of the 28 engineering classifications according to criticality. Pareto of 28 engineering classifications with a total of 5988 line items. C US $ 1.260-M NC US $ 344,000.00 Fig: 2 : This chart shows the critical and non-critical component of the 28 Engineering Classifications. The C-bar to the left represents the nine (9) critical engineering classifications comprising 80% of the entire cost of the engineering stock items worth US 1.260 M. Fig. 1 : Cost distribution of 28 Engineering Classifications amounting to US 1.604 M. Appendix 14

15. DEFINE Classifying stock items according to criticality with corresponding values The application of the FMEA on 28 classifications with 5,988 line items resulted to the identification of 9 critical classifications with 3,693 line items translated and broken down below. C US $ 1.260-M 3,693 line items MMU Inventory Costs: Classifications Critical To ADB Operations: NC US $ 344,000.00 2,295 line items Inv. Cost:: US # 1.604 M No. of Classifications: 28 No. Line Items: 5,988 No. Items-Pcs.: 240,433 Rev. Cost:: US # 1.26 M No. of Classifications: 9 No. Line Items: 3,693 No. Items-Pcs.: 110,804 Refer appendix 3, page 14 Classifications NOT Critical to ADB Operations: Balances: Rev. Cost:: US # 0.344 M No. of Classifications: 19 No. Line Items: 2,295 No. Items-Pcs.: 129,629 Fig: 2 : This chart shows the critical and non-critical component of the 28 Engineering Classifications. The C-bar to the left represents the nine (9) critical engineering classifications comprising 80% of the entire cost of the engineering stock items worth US 1.260 M.

16. Calculation and Improvement to Sigma Score based on 3,693 items. IMPROVE • Item • Codes Classifications Line Items June 2004 Nov. 2004 June. 2005 Sept. 2005 • 23 Electrical Assembly 1407 • 24 Electronic Controls 26 • Air Comp. & Generators 556 • Fire Alarm & Signals 104 • 62 Photo-Graphic Printing 926 • 72 Refrigeration & Air-Con 601 • 80 Security & Perimeter 44 • 82 Instrumentations, BAS 184 • 89 Water Treatment 54 • TOTAL CRITICAL LINE ITEMS 3,693 1,498 1,517 1,367 1,312 D E F E C T S as of 405,632 1.9109 410,777 1.9351 370,160 2.0410 355,267 1.9589 DPMO SIGMA SCORE Still a long way to go. Improving & passed Sigma 1.93 Improving & passed Sigma 2.0 Dropped due to reclassifi-cation.

17. IMPROVE FISH BONE DIAGRAM Prioritized list of X’s (Item 1 & 2) ORDERING PROCEDURES PEOPLE LOCAL SOURCE (X) STORE CLERK KNOWLEDGE (X) INDENT SPARES PURPOSE (X) WRONG SPECIFICATION PROJECTS (X) Availability of Critical stock items (EXPENSE) DIRECT (X) ISSUANCE (X) NO INVENTORY LISTING For Direct Charge items PROGRAMMED OR PLANNED (N) STORE (X) CONSTRUCTION EXCESS STOCK ITEM STORAGE (X) CRITICAL SAFEKEEPING PROCESS (X) NON-CRITICAL (X) TAGGING OR MARKING (X) DIRECT CHARGE (N) : Noise BUDGET POLICIES (Storage & Receiving) HANDLING (Material) BUDGET (X) : Control Focus on 11 X’s to improve the inventory lists of stock items critical to ADB operations. Appendix # 17

18. IMPROVE FMEA applied to 9 classifications critical to ADB operations A second FMEA was applied on the 9 critical classifications to determine and identify the equipments, spares and parts critical to ADB operations.

19. IMPROVE Classifying the equipment, parts and supplies critical to ADB operations. ANALYZE & IMPROVE PHASE MEASURE PHASE Identifying Critical Engg. Classifications: Application of FMEA for Parts, Supplies & Equip. Critical to ADB Operations: Classifications Critical To ADB Operations: Parts, Supplies & Equip. Critical to ADB Operations: MMU Inventory Costs: Rev. Cost:: US # 1.26 M No. of Classifications: 9 No. Line Items: 3,693 No. Items-Pcs.: 110,804 Refer appendix 3, page 14 Rev. Cost:: US # 486,944.00 No. of Classifications: 9 No. Line Items: 843 No. Items-Pcs.: 5,743 Inv. Cost:: US # 1.604 M No. of Classifications: 28 No. Line Items: 5,988 No. Items-Pcs.: 240,433 Total Balance of NON-CRITICAL Parts, Supplies & Equip. to ADB Operations: Classifications NOT Critical to ADB Operations: Parts, Supplies & Equip. NOT Critical to ADB Operations: Balances: Rev. Cost:: US # 0.344 M No. of Classifications: 19 No. Line Items: 2,295 No. Items-Pcs.: 129,629 Balances: Rev. Cost:: US # 773,056.00 No. of Classifications: 9 No. Line Items: 2,850 No. Items-Pcs.: 105,061 Balances: Rev. Cost:: US # 1.177 M No. of Classifications: 1 9 No. Line Items: 5,145 No. Items-Pcs.: 234,690

20. ANALYZE MMU Inventory Cost C NC Fig. 2: Pareto chart showing the critical and non-critical component of the 28 Engineering Classifications amounting to US 1.604 M. Fig. 2 : NC ; US S 344,000 Fig. 3 : NC ; US $ 773,056 TOTAL : US $ 1.177,000 NC US $ 773,056.00 C US $ 486,944.00 Fig. 3: The Pareto chart above shows the cost component of the 9 engineering classifications identified critical to ADB Operations. However, the initial count of 3,693 critical line items amounting to US $ 1.26M was, after the application of the FMEA, trimmed down to 843 line items, line items vital to ADB operations worth US $ 486,944.00. Fig. 4: The chart above represents the total cost of engineering items not critical to ADB operations. These items represents US $ 1.177M of the entire engineering stock items. Appendix 15

21. MEASURE Pareto of 843 line items Critical to ADB operations Composition of the 843 critical line items CRITICAL ITEMS COSTS LINE ITEMS PIECES Water Treatment 855 25 50 Electronic Controls 90 19 70 Fire Alarm & Signal 19,927 69 223 Air Compressors & Generators 91,265 99 175 Security & Perimeter 604 3 15 Photographic Printing 15,892 211 538 Instrumentations, BMS 99,222 41 1,018 Refrigeration & Air conditioning 65,063 119 1,373 Electrical Assembly 194,026 257 2,281 Critical stock items after FMEA amounts to US $ 486.944.00. List of 843 line items critical to ADB operation. Identifying 843 critical line items after FMEA was applied. Critical stock items after the FMEA was drastically reduced to 5,743 pcs. from the total count of 110,804 pieces.

22. IMPROVE IMPROVED PROCESS MAP :Need for regular stock items (equipment, parts and/or supplies) from the Engg. Store and stock replenishment. IMPROVED PROCESS A End Users START Need for stock item Prepare withdrawal Form/slip Prepare Purchase Requisition End-user prepares withdrawal Follow steps 4 to 8 END O A F A – F M 8 BCC CSC Etc. 2 User receives item and accomplish work End-user inspect, test & recommend acceptance 3 END Approval Review & approval by SEO & endorse to Head, OAFA-FM Solicit withdrawal approval from SEO SEO Head, OAFA-FM Solicit approval of RP by Head, OAFA-FM 1 4 OAFA-FM YES Submit to MMU for stock item issuance Check availability from Engg. Store 5 Acceptance and delivery storage 6 NO MMU-Store releases stock items Advise end –user of Delivery for inspection O A I S - P C • Additional mechanism that will control : • Approval of the request for purchase. • Advise end-user before receiving delivery • End-user inspecting delivery before acceptance • and, MMU to accepts and store delivered item • Refer to submitted list of authorized source.. Forwarded to OAIS- PC for action Request for Quote, issue PO Refer to database for authorized Source or supplier

23. IMPROVE IMPROVED PROCESS MAP :Need for stock items (equipment, parts and/or supplies) for a particular A I G Project. PROCESS B (AIG) Refer to Master catalogue before raising a RP 1 Check Master Catalogue for stock item YES End Users PROJECT START Need for stock item Prepare withdrawal Form/slip Accomplish and complete project. PROJECT ENDS O A F A - F M BCC, CSC Etc. NO Formally return excess materials to Engg. 2 Prepare Purchase Requisition End-user inspect, test & recommend acceptance 9 Approval Review & approval by SEO & endorse to Head, OAFA-FM Review and Approve withdrawal request. 3 SEO Excess materials to be formally turned over to and recorded by MMU. All deliveries are to be properly inspected & tested prior to acceptance. Head, OAFA-FM 4 Solicit approval of RP by Head, OAFA-FM Request for purchase are reviewed by SEO Before endorsement for approval. List of authorized sources identified and list endorsed to PC. OAFA-FM Receives, records and storage 11 Submit to MMU for stock item issuance. 10 8 Advise end –user of Delivery for inspection Acceptance and delivery storage MMU review and issue items O A I S - P C 5 Forwarded to OAIS- PC for action Request for Quote, issue PO 7 6 Refer to database for authorized Source or supplier

24. Projected Six Sigma Score from March 2006 to March 2007. IMPROVE • Item • Codes Classifications Line Items Nov. 2005 • 23 Electrical Assembly 257 44 35 20 10 2 • 24 Electronic Controls 19 6 0 0 0 0 • Air Comp. & Generators 99 5 0 0 0 0 • Fire Alarm & Signals 69 15 10 5 0 0 • 62 Photo-Graphic Printing 211 11 5 0 0 0 • 72 Refrigeration & Air-Con 119 34 30 15 5 0 • 80 Security & Perimeter 3 1 0 0 0 0 • Instrumentations, BAS 41 10 5 5 0 0 • 89 Water Treatment 25 4 3 0 0 0 • TOTAL CRITICAL LINE ITEMS 843 130 88 45 15 2 D E F E C T S as of Mar. 2006 June 2006 Dec. 2006 Mar. 2007 154,211 2.955 98,458 2.958 53,381 3.833 17,794 4.735 2,372 5.593 DPMO SIGMA SCORE Nearing 3.0 Still a long way to go. Improving & nearing Sigma 3.0 score Improving passed 4.0 Sigma Score Passed and reached 4.7 Sigma Score A great lift to 5.5 Sigma Score

25. Solutions and Improvements IMPROVE Refer to Appendix # 10

26. IMPROVE Improvements and Benefits QUICK WINS IMPROVEMENTS COST COMPARISON SAVINGS/BENEFITS People: Inexperienced Clerk Store Management Staff training. Management sourced out Staff Salary & Benefits: Php 1.93M/annum. Compared to: Svc. Provider Contract: Php 1,86M/annum Php 72,000/annum Excl. medical, reti- ment benefits, etc. Procurement Process: Stock information Critical Supplies Improvement to stock information, catalogue and suppliers lists Immediate access to stored stock items. Updated stock description/specifications. Updated list of suppliers/sources Time and reduced Man-hr. with cost Equivalent. Material Mgnt. Unit Direct issuance of items Stock item storage Guideline in safekeeping DC items stored and kept in central storage room. DC items movements are controlled and monitored. Critical stock items marked. Stock item under one control. Saved/vacated spaces translate to Php 630,000.00/yr. Budget: Budget utilization Stock replenishment Utilization as per work plan. Replenishment needs SEO’s approval. Proper utilization of approved budget. Controlled purchases and resulted to big savings in 2006 proposed budget. Cost avoidance of US $ 80,000 from 2005 budget. Material Handling: Access to stock items Stock Classification Information via PC’s. Identified critical and non-moving stock items. Salvage value of US $ 9,000.00 (10-15% of costs). Easy access to stored stock items. Identified non-moving, non-usable items for disposal in the amount of US $ 60,000 Appendix # 18

27. RISK ASSESSMENT IMPROVE

28. Stakeholder Analysis CONTROL

29. Guideline on the management of excess materials from projects. CONTROL This control mechanism and guideline in accounting and storage of excess materials was done and executed internally between OAFA- FM and MMU.

30. THEN & NOW, Comparison of the Old process map against the New ones. CONTROL WEAKNESSES IMPROVEMENTS • NORMAL STOCK ITEMS: • 1. Stock items Critical to ADB-HQ operations are properly classified and marked. • 2. Initiation of RP’s, Procurements, Delivery, Inspection and Receiving are streamlined. • DIRECT CHARGE ITEMS: • 1. All RP’s raised for whatever purposes are reviewed and approved by SEO. • 2. All material deliveries are checked, inspected and kept in a separate storage intended for AIG Projects. • 3. Material issuance and usage are properly monitored and controlled following the Engg. Store management standards. (Refer to Process Control Flow Chart, Slide # 23 ) • CONTROLS: • 1. Stock information before raising an RP can now be accessed from the computer. • 2. OAIS-PC was provided a list of reliable suppliers and sources of equipment, supplies and spare parts. Refer to Appendix 10. • 3. All RP’s initiated are reviewed by the SEO prior to the approval of Head, OAFA-FM. • 4. RP’s are based on approved work programs and plans. • 5. An internal agreement was reached between OAFA-FM and OAFA-MMU was executed creating the Guideline in Managing and Controlling Non-Stock (direct charge items) Engg. Supplies and Equipment which took effect last 01 July 2005. Refer to Slide # 29. • NORMAL STOCK ITEMS: • 1. Stock items in store are not marked if Critical or Not Critical to ADB –HQ operations. • 2. Approval an RP can be done easily. • DIRECT CHARGE ITEMS: • 1. Ordering and raising of RP for materials intended for AIG projects are seldom reviewed by SEO. • 2. Materials are directly issued to project proponent and kept in different locations. • 3. Absence of material usage monitoring and control. • CONTROLS: • 1. No immediate access to Stock-on-Hand, stock movement and stock level for raising an RP. • 2. Absence of list of reliable suppliers and sources of critical equipment, supplies and spare parts. • 3. RP’s can easily be raised and approved. • 4. RP’s for equipments, supplies and spare parts are sometime initiated due to availability of budget. • 5. Absence of control mechanism in receiving and storage of direct charge items. The weaknesses were professionally addressed and improvements implemented with the issuance of “Guideline in the management and control of non-stock items”.

31. Then & Now Improvements IMPROVE Pictures/photos of the container vans located at the Gas Station Area converted to Direct Charge item storeroom.

32. Then & Now Improvements IMPROVE Pictures/photos of the Engineering stock items properly marked and tagged CRITICAL.

33. Financial Gains Soft & Hard Savings CONTROL Appendix # 20

34. Controls & Monitoring Stock Items CONTROLS

35. Lessons Learned CONTROL • Lessons Learned: • a. Store Management: • Technically competent & knowledgeable staff to manage and control of engineering stock items is required. • b. Elimination of overstocking: • Regular conduct of physical inventory and monitoring of movement of critical stock items. • Review of stock classifications, descriptions and identifications. • SEO to review of all replenishments and Requests for Purchases. • Realistic preparation and wise utilization of the Operations and Maintenance Budget. • c. Conformance to specifications and standards: • Procurement sole and/or authorized distributor to ensure compliance to standards and quality. • Items requested must contain the complete specification and recommended possible item source (subject to PC approval).

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