This appendix includes the title and reference number for every best

Transcription

1 Inventory Best Practices, Second Edition By Steven M. Bragg Copyright 2011 by John Wiley & Sons, Inc. APPENDIX Summary of Inventory Best Practices This appendix includes the title and reference number for every best practice listed in the book, and serves as a quick reference guide. In addition, the formulas for all the measurements noted in Chapter 14 are listed at the end of the appendix. Chapter 2 Inventory Purchasing 2.1 Include Suppliers in the New Product Design Process 2.2 Use Supplier-Concurrent Engineering 2.3 Avoid Designing Risky-Procurement Items into Products 2.4 Match Product and Part Life Cycles 2.5 Reduce Safety Stocks by Shrinking Supplier Lead Times 2.6 Purchase Supplier Capacity 2.7 Reduce Safety Stocks by Accelerating the Flow of Internal Information 2.8 Buy from Suppliers Located Close to the Company 2.9 Relocate Suppliers On-Site 2.10 Use Local Suppliers for Rapid Replenishment 2.11 Consider Foreign Sourcing 2.12 Use Auctions for Selective Purchases 2.13 Compare Suppliers Based on Total Landed Cost 2.14 Eliminate Approvals of Routine Purchases 2.15 Purchase Based on Material Requirements Planning 2.16 Compare Open Purchase Orders to Current Requirements 2.17 Freeze the Short-Term Production Schedule 307

2 308 / Inventory Best Practices 2.18 Share Production Plan with Suppliers 2.19 Obtain Direct Links into Customer Inventory Planning Systems 2.20 Require Frequent Deliveries of Small Quantities 2.21 Arrange for Inbound Split Deliveries 2.22 Arrange for Phased Deliveries 2.23 Adopt Rolling Schedules 2.24 Adopt Just-in-Time Purchasing 2.25 Implement Stockless Purchasing 2.26 Centralize Purchasing 2.27 Designate Major Suppliers as Lead Suppliers 2.28 Single-Source Products 2.29 Install a Supplier Rating System 2.30 Use Long-Term Supplier Relationships for Strategic Purchases 2.31 Shift Raw Materials Ownership to Suppliers 2.32 Flag Changes Impacting Advance Material Requests Chapter 3 Inventory Receiving and Shipping 3.1 Reject Unplanned Receipts 3.2 Obtain Advance Shipping Notices for Inbound Deliveries 3.3 Directly Enter Receipts into Computer 3.4 Automatically Collect Inbound and Outbound Cube and Weight Information 3.5 Repackage Incoming Items into Increments Ordered by Customers 3.6 Put Away Items Immediately after Receipt 3.7 Stage Received Goods for Zone Putaways 3.8 Eliminate the Receiving Function 3.9 Combine the Shipping and Receiving Functions in One Area 3.10 Assign Docks Based on Minimum Warehouse Travel Time 3.11 Require Supplier Deliveries with Open-Sided Trucks Directly to Production 3.12 Ship Using Returnable Wheeled Containers 3.13 Use Dunnage Bags to Cushion Outbound Shipments

3 Summary of Inventory Best Practices / Use Shippers with the Most Consistent Delivery Performance 3.15 Have Delivery Person Deliver the Invoice 3.16 Pay Suppliers Based Only on Receiving Approval 3.17 Provide Pending Shipment Information to the Collections Staff 4.1 Drop Ship Inventory 4.2 Cross-Dock Inventory Chapter 4 Inventory Storage 4.3 Move Inventory to Floor Stock 4.4 Use Temporary Storage for Peak Inventory Requirements 4.5 Assign Unique Location Codes to All Inventory Storage Locations 4.6 Reduce the Number of Inventory Bin Locations Assigned to the Same Product 4.7 Assign Fixed Inventory Locations to High-Volume Items 4.8 Segregate Customer-Owned Inventory 4.9 Allocate Warehouse Areas to Specific Customers 4.10 Segregate Inventory by ABC Classification 4.11 Store High-Volume Items in Order Fulfillment Zones 4.12 Adjust Case Height to Match Cubic Storage Capabilities 4.13 Adjust Case Stacking or Width to Avoid Pallet Overhang 4.14 Combine Out-and-Back Inventory Moves 4.15 Use Different Storage Systems Based on Cubic Transactional Volume 4.16 Use Modular Storage Cabinets for Low-Storage-Volume Items 4.17 Use Carousels to Increase Picking Efficiency 4.18 Use Movable Racking Systems 4.19 Use Multistory Manual Picking Systems 4.20 Use Gravity-Flow Racking for FIFO Picking 4.21 Use Pallet-Flow Racks for Pallet FIFO Picking 4.22 Create Double-Deep Racking or Stacking Lanes for Large SKU Pallet Volumes 4.23 Use Push-Back Racks for Multiple Pallet Storage 4.24 Eliminate Cross Bracing in Low-Weight Storage Configurations

4 310 / Inventory Best Practices Chapter 5 Inventory Picking 5.1 Group Single-Line Orders and Pick in Order by Location 5.2 Use Single-Order Picks for Emergency Orders 5.3 For Manual Systems, Pick from the Source Document 5.4 Implement Forward Picking 5.5 Use Wave Picking by Grouping to Consolidate Transactions 5.6 Use Zone Picking to Consolidate Total Transactions 5.7 Use Zone Picking with Order Forwarding 5.8 Use Voice Picking to Record Low-Volume Picking Transactions 5.9 Use Pick-to-Light to Record High-Volume Picking Transactions 5.10 Use Portable Scales to Pick Small Items 5.11 Pick into Multibin Carts 5.12 Store Kitted Inventory in an Accumulation Bin 5.13 Use Standard Containers to Move, Store, and Count Inventory 5.14 Issue Parts in Full-Bin Increments 5.15 Have Suppliers Sequence Their Parts Deliveries 5.16 Avoid Restocking during a Picking Shift 5.17 Optimize Inventory Storage through Periodic Location Changes Chapter 6 Production Issues Impacting Inventory 6.1 Eliminate Incentive Pay Systems Causing Excessive Production 6.2 Standardize the Number of Shifts Worked throughout a Factory 6.3 Allow Production Workers to Call Suppliers about Faulty Materials 6.4 Invest in Smaller, Low-Capacity Machines Rather than High- Capacity Ones 6.5 Purchase Machines from a Single Supplier 6.6 Produce the Same Parts on the Same Machine Every Time 6.7 Perform Inspections at the Next Downstream Workstation 6.8 Improve Periodic Equipment Maintenance 6.9 Shift Some Equipment Maintenance to the Production Staff 6.10 Preplan Major Equipment Maintenance

5 Summary of Inventory Best Practices / Replace Aisles with Conveyors 6.12 Schedule Smaller Production Batches 6.13 Produce to Order Rather than to Stock 6.14 Reduce Container Sizes 6.15 Reduce Setup Times 6.16 Shorten Cycle Times 6.17 Replace Straight Assembly Lines with Serpentine Lines 6.18 Reduce the Length of the Assembly Line 6.19 Divide the Assembly Line into Segments 6.20 Use Cellular Manufacturing 6.21 Group Machines Cells near Common Inventory Storage Areas 6.22 Position Local Cell Storage between Workstations and Aisles Chapter 7 Inventory Transactions 7.1 Reduce the Number of Stored Data Elements 7.2 Record Inventory Transactions with Barcodes 7.3 Record Inventory Transactions with Radio Frequency Communications 7.4 Track Inventory with Radio Frequency Identification (RFID) 7.5 Eliminate All Paper from Inventory Transactions 7.6 Use the Kanban System to Pull Transactions through the Facility 7.7 Eliminate All Transaction Backlogs 7.8 Verify That Receipts Are Entered in the Computer System at Once 7.9 Have Customers Order by Part Number 7.10 Audit All Inventory Transactions 7.11 Compare Recorded Inventory Activity to On-Hand Inventories 7.12 Immediately Review All Negative Inventory Balances 7.13 Replace the Physical Count Process with Cycle Counts 7.14 Use Control Groups to Locate Transaction Errors 7.15 Prioritize Cycle Counts on Next-Usage Items 7.16 Streamline the Physical Count Process 7.17 Install a Warehouse Management System

6 312 / Inventory Best Practices Chapter 8 Inventory Planning and Management 8.1 Include Materials Managers in the New Product Design Process 8.2 Reduce the Number of Product Options 8.3 Increase Prices for Nonstandard Options 8.4 Increase Prices for Small-Unit Orders 8.5 Convert Information Products to Electronic Versions 8.6 Reduce the Number of Products 8.7 Reduce the Number of Customers 8.8 Avoid Promotions 8.9 Design Products with Lower Tolerances 8.10 Require Formal Review and Approval of Engineering Change Orders 8.11 Assign Inventory Items to Classifications 8.12 Forecast Demand by Product Families 8.13 Segment Forecasted Demand into Stable and Unstable Products 8.14 Centralize Responsibility for Inventory Planning 8.15 Delay the Order Penetration Point as Long as Possible 8.16 Use a Material Requirements Planning System to Model Alternative Lot Sizes, Safety Stocks, and Lead Times 8.17 Reduce Job Releases to Production 8.18 Prioritize Production Based on Delivery Region 8.19 Use Variable Safety Stocks for Fluctuating Demand 8.20 Convert Safety Stock to Just-in-Case Stock 8.21 Eliminate Expediting 8.22 Develop a Product Substitution System 8.23 Question the Level of Customer Service Provided 8.24 Focus Inventory Reduction Efforts on High-Usage Items 8.25 Create a Visual Review System for Noninventoried Parts 8.26 Eliminate Departmental Stocks 8.27 Install a Distribution Requirements Planning System 8.28 Distribute Slow-Moving Items from Regional Warehouses 8.29 Install a Hold and Flow System 8.30 Use Overnight Delivery from a Single Location for Selected Items

7 Summary of Inventory Best Practices / Use Fair Shares Analysis to Allocate Inventory to Warehouses 8.32 Periodically Rationalize the Warehouse Network 8.33 Plan for Product Shutdowns 8.34 Create a Materials Review Board 8.35 Identify Obsolete Inventory via Physical Inventory Tags 8.36 Plan for Service Parts Inventory Levels 8.37 Inspect Returned Merchandise for Usability 8.38 Reserve Otherwise Obsolete Inventory with Service/Repair Designation 8.39 Avoid Product Obsolescence with Shelf-Life Control 8.40 Create an Obsolete Inventory Budget for Disposals 8.41 Batch Excess Inventory for Sale to Salvage Contractors 8.42 Sell Excess Items through the Service Department 8.43 Set Up a Reverse Logistics System 8.44 Outsource Selected Warehousing Functions Chapter 9 Warehouse Layout 9.1 Include Other Issues than Cost in a Warehouse Acquisition Decision 9.2 Generally Organize the Warehouse in a U-Shaped Process Flow 9.3 Organize the Warehouse by Storage Zones 9.4 Maximize Vertical Storage Space 9.5 Tailor Vertical Storage Space to Manual Picking Needs 9.6 Enclose Building Supports in Racks 9.7 Use Narrow Aisles in Manual Putaway and Picking Zones 9.8 Avoid Aisles Adjacent to Outside Walls 9.9 Use Automated Storage and Retrieval Systems 9.10 Use Automated Guided Vehicle Systems 9.11 Use Conveyors to Reduce Employee Travel 9.12 Avoid an Excessive Level of Warehouse Automation 9.13 Eliminate the Quality Review Area 9.14 Enlarge the Receiving Area 9.15 Design Just-in-Time Docks for the Largest Anticipated Trucks 9.16 Lock Down the Warehouse Area

8 314 / Inventory Best Practices 9.17 Plan for Maximized Warehouse Space Utilization 9.18 Eliminate the Warehouse Chapter 10 Cost Accounting 10.1 Eliminate Purchase Price Variance Tracking 10.2 Eliminate Tracking of Work-in-Process Inventory 10.3 Eliminate Scrap Reporting in the Production Area 10.4 Charge the Entire Inventory to Expense 10.5 Use Specific Identification Costing with RFID Tags 10.6 Have the Costing System Separate Value-Added and Nonvalue- Added Activities 10.7 Assign Overhead Based on Square Footage Used 10.8 Do Not Credit Internal Departments with Sales When Production Is Completed 10.9 Report on Landed Cost Instead of Supplier Price Report on the Total Cost of Product Ownership Implement Activity-Based Costing Assign Overhead Personnel to Specific Subplants Implement Target Costing Limit Access to Unit-of-Measure Changes Review Cost Trends Review Material Scrap Levels Revise Traditional Cost Accounting Reports Audit Labor Routings Follow a Schedule of Inventory Obsolescence Reviews Chapter 11 Bills of Materials 11.1 Audit Bills of Materials 11.2 Conduct a Configuration Audit 11.3 Modify the Bills of Materials Based on Actual Scrap Levels 11.4 Modify the Bills of Materials for Temporary Substitutions 11.5 Eliminate Redundant Part Numbers 11.6 Standardize Parts

9 Summary of Inventory Best Practices / Review Inventory Returned to the Warehouse 11.8 Use Bills of Materials to Find Inventory Made Obsolete by Product Withdrawals 11.9 Identify Inactive Inventory in the Product Master File Chapter 13 Inventory Policies and Procedures 13.1 Create a Policies and Procedures Manual 13.2 Train the Warehouse and Accounting Staffs in Inventory Procedures 13.3 Cross-Train for Mission-Critical Activities 13.4 Train Using Training Teams Chapter 14 Inventory Measurements Percentage of new parts used in new products Percentage of existing parts used in new products Number of new parts in bill of materials Total number of parts in bill of materials Number of approved parts in bill of materials Total number of parts in bill of materials 14.3 Raw materials content Raw material dollars sold Sales Bill of materials accuracy Item master file accuracy Number of accurate parts listed in bill of materials Total number of parts in bill of materials Total number of records reviewed having 100 percent accurate information Total number of records sampled 14.6 Economic order quantity 2 Total use in units Cost per order Carrying cost per unit 14.7 Distribution turnover Dollars of manufacturing purchases per year Dollar value of incoming inventory

10 316 / Inventory Best Practices 14.8 On-time parts Actual arrival date delivery percentage Requested arrival date Quantity of orders with correct Incoming components correct quantity percentage parts quantity delivered Total quantity of orders delivered Purchased component defect rate Number of rejected components Total number of components received Percentage of receipts authorized by purchase order Receipt line items authorized by open purchase orders Total receipt line items Percentage of purchase orders released with full lead time Purchase order lines released with full lead time Total purchase order lines released Putaway accuracy Number of accurate putaway transactions Total number of putaway transactions Putaway cycle time Sum for all receiving transactions Putaway date Time Receipt date Time Number of receipts during the measurement period Scrap percentage Actual cost of goods sold Standard cost of goods sold Standard cost of goods sold Average picking time Total number of orders completed Total person-hours worked by picking staff Total person-hours worked by contract staff Picking accuracy for assembled products 100 Number of quantity errors Number of parts errors Total number of product kits sampled

11 14.18 Average picking cost Summary of Inventory Best Practices / 317 Fully burdened picking staff wages Depreciation on picking equipment and storage Total order lines picked Order lines shipped per labor hour Total order lines shipped Total labor hours used to ship orders Shipping accuracy Total order lines shipped Incorrect order lines reported by customers Total order lines shipped Percentage of products damaged in transit Damage-related customer complaints Number of orders shipped Warehouse order cycle time Date and time of last line item delivery Date and time of order receipt Inventory availability Total number of completed orders received by customer by required date Total number of orders that should have been completed Delivery promise slippage Sum for all delivery transactions Delivery date time Original promise date time Total number of deliveries Average back-order length Dock door utilization Sum of the Number of days past the required customer receipt date for each order Total number of back-ordered customer orders Average dock time per trailer Number of trailers docked Number of hours in measurement period Number of dock doors Inventory accuracy Number of accurate test items Total number of items sampled Inventory turnover 365 Cost of goods sold Inventory

12 318 / Inventory Best Practices Inventory turnover formula 2 Direct materials expense Raw materials inventory Percentage of warehouse stock locations utilized Number of utilized stock locations Total number of stock locations in the warehouse Square footage of warehouse storage space Storage density percentage Cubic volume of available storage space Total warehouse square footage External staging area square footage Inventory per square foot of storage space Cubic volume of inventory on hand Total warehouse square footage External staging area square footage Storage cost per item Total warehouse expenses Total SKUs on hand Average pallet inventory per SKU Forecasted SKU unit sales Turnover Units per pallet Rate of change in inactive obsolete and surplus inventory Current IOS inventory balance Beginning IOS balance Actual write-off in the period Number of months covered by calculation Obsolete inventory percentage Percentage of inventory X days old Percentage of returnable inventory Cost of inventory items with no recent usage Total inventory cost Dollars of inventory X days old Total dollars of inventory Dollars of returnable inventory Total dollars of inventory