Divide and Conquer by Segmenting Your Inventory

Transcription

1 Divide and Conquer by Segmenting Your Inventory Kaye Cee McKay,CFPIM, CSCP Tuesday, October 6th Top 5 Priorities for Inventory Management Today! Type of business What are your: Inventory turns Inventory accuracy % of slow or obsolete material Objectives Case Study Inventory Reduction Management View Practical View Hot Spots Tools

2 Annual Event Yearly Inventory Reduction Go from this To This! Basics A Rose by any Other Name Fundamentals No magic pill Inventory management vs. control Can t optimize what you can t control Mandate - Reduce Inventory by 10% Where do you begin?

3 Case Study Company #1 High performance, 1 st response In business for 35 years Implemented lean 5 years ago Environment injection molding & assembly Inventory Snapshot Inventory Turns = 3.4 Purchasing used: EOQ Kanban cards Current State Inventory up 1.6 in 6 months Segment #1 Management View Raw 9.4% WIP 21.8% Finished goods 2.5%

4 Asset Management (Sets Policies) Inventory turns as a Measurement Looks backwards Formula assumption Doesn t answer the question which parts? Inventory days o/hand Segments # 2-4 Practical View Functions of Inventory Anticipation Safety stock Lot size Transportation Hedge 2 - Anticipation Inventory Based on

5 Monitoring the Forecast + 10% Upper Control Limit Target = 100 Lower Control Limit - 10% 13 Consequences of a Poor Forecast (Or when not to believe your customer) 3 - Safety Stock Inventory Based on. Is it a bad thing? How much is too much?

6 Results 42-63% Safety Stock Quantity Reduction QTY Swab Urine Female Male Vaginal Kits Current Future Results - Down $480k Safety Stock Value Swab Urine Female Male Vaginal Kits Current Future When it Comes to Safety Stock. One Size doesn t fit all What s even better?

7 4 - Lot Size Inventory Lean Techniques EOQ POQ Food for Thought Exercise Based on the following BOM: 1) Calculate order quantity based on product structure 2) Determine residual $1.00 ea Demand is 501 Level 0 Parent / lot size = 100 Order QTY 600 Excess $99 Level 1 S/assy / lot size = $150 Level 2 Child / lot size = 500 1,000 $250 Lot Size Considerations Why make or buy more then we need? Who is accountable? Measure back end also

8 REAL Results From this Current State Lot Size F/Cast Lot Size Swab Urine Female Male Vaginal Kits REAL Results To this Future State Lot Size F/Cast Lot Size Swab Urine Female Male Vaginal Kits ABC analysis Segment # 5 Practical View Purpose

9 Common Use Classify by importance Purpose 80/20 rule A = 80% / 20% B = 15% / 30% C = 5% / 50% Broader View 10 + Ways to use ABC analysis Life Cycle Mgmt Brainstorm Team with most applications wins! Purchasing negotiations Lot size policy Customer Service levels Quality initiatives Engineering Changes Part# Forecasting Reduction Receiving Safety stock level Supplier selection/ partnerships SMED & throughput Days O/H policy Problem #1 Obsolescence

10 Problem #2 Inventory accuracy Cycle counting Is Cycle Counting Value Added? Customer point of view Different point of view Count Exercise Problems from inaccurate records Shortages Frustration Poor customer service Excess Inventory Late Shipments Backorders Waste looking for parts Expedited orders Less profit MRP not effective

11 Think Like a Bank Only two transactions Withdrawals Deposits Cause and Effect of Data Integrity On Inventory Overall levels Safety stock On Customer Service Shipments faster Efficiencies Company # 1 Results Company # 2

12 Problem # 3 Lead Time Lead Time Considerations What s the cost? Formula for OP = DDLT + SS Assume Demand = 100 per wk LT = 3 weeks SS = 1 week $1.00 per unit $300 + $100 = $400 $500 + $100 = $600 Supplier Considerations Effect on Inventory Partner Metrics Proximity Technology Vendor Managed Inventory (VMI)

13 Problems # 4,5 & 6 Too many SKU s Poor change control Poor part# design Example What s the Diff? PDT6842N1S642US PDT6842NI5642US PDT6842NIS642US Best short, numeric, use description instead Tools Measurements Measure to motivate Measures to align Measures to improve

14 Lean Tools Effective S&OP Process Kanban Root cause 5S s More Tools! Celebrate the wins! Communicate/visual goals Recognition (individual /team) Weekly/monthly/annual rewards To Summarize

15 Remember Cut in all the right places! Review Learning Objectives Inventory reduction Management view Practical view Hot spots Tools Questions? Evaluations! Thank you Kaye Cee McKay