INVETORY MANAGEMENT

1. INVETORY MANAGEMENT Presented By: Leydi Velez Ahmed Al Shaeef Herbert Guerrero John Herrera EIN 5346 Logistics Engineering Chapter 9

2. Agenda • Contemporary Approaches to Managing Inventory • Inventory Management Software • Vendor-Managed Inventory (VMI) • Just-in-Time (JIT) • JIT Case Study

3. Inventory Management Software

4. Inventory Management Software • Eliminate manual inventory management processes thereby reducing errors and lead time. • Provides managers easy access to the numbers that are needed for reporting and restocking information. • Provides complete real-time visibility into demand, supply, costs and fulfillment measures and trends. • Significantly improve your relationships with suppliers, vendors and partners by providing self service and real-time visibility. Benefits:

5. Inventory Management Software Benefits Continued: • Improve demand planning/reduce forecast error rate • Reduce lost sales and backorders • Increase inventory turnover • Manage large numbers of styles and SKUs efficiently and accurately • Improve management understanding of forecasting and inventory management process and performance • Increase sales and profits

6. Inventory Management Software inFlow Inventory software for small to mid-sized businesses. divided up into four main modules: Sales – Sales Orders and Customer Information Purchasing – Purchase Orders and Vendor Information Inventory – Product Information, Stock Quantities, Stock Adjustments, etc. Reports – Reports offered by inFlow to gather and share information http://www.inflowinventory.com/ Download options: Free Edition, Regular Edition ($299/license), Premium Edition ($499/license)

7. Inventory Management Software Traker Systems Software development company providing Inventory Control Software for 3PL Public Warehouses, Manufacturers, and Distributors. Inventory Control TrackerTM Inventory records are updated automatically Notifications (reaching expiration date) Multiple warehouse tracking Track items by item #, lot #, production code, date, carrier, consignee. http://www.trakersystems.com Editions: 3PL Public Warehousing Edition, Manufacturing & Distribution Edition, Lite Edition

8. Inventory Management Software FishBowl Inventory Inventory Management system for small to medium-sized companies that integrates with Quickbooks. Features: Multi-location inventory tracking Manufacturing Part Tracking Unit of measure Drop shipping Bar coding Credit card processing Variable pricing and discounting Order picking Kitting www.fishbowlinventory.com

9. Inventory Management Software AdvanceWare Technologies, AdvancePro Inventory http://www.advanceware.net NetSuite http://www.netsuite.com/portal/products/netsuite/supply-inventory/main.shtml Direct Tech, Inc. Forecast*21 (Inventory forecasting) http://www.direct-tech.com

10. Inventory Optimization Software Mincom Critical Inventory Optimization (MCIO)is an intelligent, predictive software solution that identifies the optimal holdings of every stock item based on usage patterns and criticality. MCIO automatically analyzes and adjusts stock levels and reordering requirements on an ongoing basis. SmartOps Enterprise Inventory Optimization (EIO) is a comprehensive suite of software modules that enables organizations to plan and manage inventories across global supply chains. SmartOps EIO encapsulates sophisticated, proprietary algorithms into software that integrates with enterprise planning systems and handles large-scale, complex supply chains in a dynamic and automated manner.

11. Inventory Optimization Software JDA’s Network & Inventory Optimizationuses deterministic and stochastic optimization combined with flexible user-interface and analytical workbenches Smartcorp uses proven forecasting solutions that accurately predict, for each product item, the most likely or expected value for demand over a given lead time.  The safety stock recommendations and stocking level estimates that are generated are immediately available for use in other parts of your corporate planning system

12. Vendor-Managed Inventory

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

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

15. Main Activities • Supplier/Vendor has access to customer’s inventory data • Supplier/Vendor is responsible for maintaining the inventory level required by the customer • Supplier/Vendor replenishes inventory via scheduled reviews

16. Benefits • Supplier • Increased volume • Forces disciplines • Measurements • Communication • Better planning and resource use • Visibility via information sharing • Need to eliminate or reduce non-value-added activities • Reduce safety-stock • Customer • Automate Replenishment process • Reduced inventory • Reduced operating costs • Focus on core process • Intangibles • Shorter cycle time • Greater customer satisfaction • Avoid stock-outs

17. How to make it work • Clarify expectations • How the system will benefit both organizations in the long term • Agree on how to share information • Enough information to maintain a steady flow of goods is necessary • Keep communication channels open • Misunderstandings need to be studied as opportunities for learning and then used to avoid repetitive problems in the future

18. VMI Flow

19. Performance Measurements • How to ensure VMI will enhance the business? • Establish measures – identify the goal • Starting number of items vs. expected goal • Inventory $ initially vs. expected goal • Total inventory $ at start, during, and after

20. Measurements • 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

21. Just-In-Time (JIT)

22. JUST-IN-TIME (JIT) JIT is originated in Japan as part of the Toyota Production System in the approach to a Lean Production System. JIT is a strategy that strives to improve a business’s return on investment by reducing in-process inventory and associated carrying cost.

23. JUST-IN-TIME • JIT means making only “what is needed, when it is needed, and in the amount needed.” • JIT supplies “what is needed, when it is needed, and in the amount needed” according to the production plan to eliminate waste, inconsistencies, and unreasonable requirements, resulting in improved productivity • JIT removes inventory to expose production flaws that can be corrected or removed in order to improve production quality and increase efficiency and effectiveness .

24. PROGRESSION TO JIT

25. JUST-IN-TIME EFFECTS • Increase factory response time. • Improve customer satisfaction. • Build of make-to-order models to eliminate the risk of no being sold. • Standardization of parts assemblers increasing product quality. • Reduce setup time allowing the company to reduce or eliminate inventory for “change-over” time. • The flow of goods from warehouse to shelves improves by reducing lot sizes to simplify inventory flow and inventory management.

26. JUST-IN-TIME BENEFITS • Employees with multiple skills are used more efficiently by having the flexibility to move employees where they are needed. • Production schedule and work hour consistency is synchronized with demand by avoiding paying overtime or focus resources to other areas. • Increase emphasis on supplier relationship. • Supplies comes in at regular intervals through the production day by synchronizing the supply with the demand.

27. JUST-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.

28. JIT Case Study Stopping Stock Outs with Anixter’s Just-in-Time Supply Source: http://www.anixter.com

29. Case study: Anixter Anixter is a leading global supplier of communications and security products, electrical and electronic wire and cable, fasteners and other small components. They provide innovative supply chain management services to reduce customers' total cost of production and implementation For more than five years, Anixter has developed a relationship with a major manufacturer of medical equipment. Anixter supplies this manufacturer with a variety of fasteners directly delivered to its production facility. The fasteners are used to build medical equipment from lighting and cabinets t electro cardiogram testers and examination tables

30. Case study: Anixter Before Anixter started working with the company, a normal turnaround on the delivery of parts would take a week. This slow turnaround increasingly led to delivery delays and out-of-stock situations to cover for the delays and stock-outs. On-site inventory levels were also increased to cover potential shortages.

31. Case study: Anixter Challenge Minimize turnaround on delivered parts. Solution Anixter applied Just-In-Time supply chain with the objective of keeping the required amount of products on the manufacturing floor.

32. Case study: Anixter Two manufacturing facilities located in close to each other. More than 2,000 bins placed in seven stocking locations spread across the two facilities. The company placed between 300 to 800 line orders a week. Providing between 900 and 1,000 part numbers. Each of the stocking locations needed to meet a specified min/max range to meet production goals without overstocking material.

33. Case study: Anixter Anixter implemented a Just-in-Time program that shifted the inventory to Anixter’s distribution center to allow for a controlled and planned release of material to the production facilities. Anixter established a schedule that allowed the Anixter employee to scan the bin levels on a weekly basis. During the course of the first year, Anixter worked with the customer to create usage forecasts.

34. Solution Anixter generated weekly usage reports, which created minimum and maximum quantity ranges on the used products without risking stock-outs or over-delivery. Based on two- to eight-week requirements, Anixter successfully worked with the customer to reduce the amount of on-hand materials and create an efficient just-in-time solution that kept the required amount of products on the manufacturing floor.

35. Program Results Forecasting allowed the manufacturer to gain greater control over its inventory and set expectations of the levels of materials that would be kept on the production line and in its storerooms. Instead of everything going through separate steps from a buy to expediter to receiver to quality control to builder, everything is handled by Anixter. The manufacturer only had to focus on the building of its products. The company has set a goal of doubling its profits in five years. Reducing its supplier base by half. Because of Anixter’s just-in-time program, the supply chain has built-in flexibility to meet shifting demands.

36. Benefits Obtained Reduced capital investment in components and associated costs Increased facility space Increased efficiency Improved single point of control for all material receipt Eliminated production line shortages and delays

37. Questions ?