Supply Chain Videocast

Transcription

1 Supply Chain Videocast Introducing the Lead Time-Inventory Calculator Unlocking the Mysteries of Vendor Performance And Inventory Levels

2 Today s Panel Mark Krupnik CEO, Retalon Kevin Harris Compliance Networks

3 Broadcast Made Possible by:

4 Compliance Networks

5 Introductory Comments Out of stocks (OOS) continue to be major issues for retailers and manufacturers Relationship between vendor performance (fill rates, on-time, variability) and retail inventories, out-of-stocks, lost sales not well understood Impact varies by retail sector (e.g., grocery versus apparel) Cross dock model versus store and pick

6 Introductory Comments Supply chain models matter: Long supply chains: variability matters Short supply chains: fill rate matters Regional Grocery Chain Observation Just what is the impact of vendor shipment with a 90% fill rate?

7 Safety Stock depends on Risks Variability in Demand Forecast Error Lead Time Variance Fill Rate Variance Company Policies: Desired Service Levels by Contribution Codes Corporate Policies and Regulations Replenishment (re-order) Rules Capacities and Restrictions - Expected Performance

8 Example to Clarify Calculations of Benefits Replenishme nt Cycle LT Improvement points LT Variabil LT Weeks ity Variability Days Total WOS Total Days Inventory of Supply Cost Inv. Cost % $1,000, % $966,667 $33, % $833,333 $166,6 67

9 Real World Data Consumer products retailer Multi-billion $ in sales per year 800 stores Replenishm ent Cycle LT LT Variabili ty LT Weeks variability Days Total WOS Total Days of Supply Inventory Cost % $ 12,400,000 5% $ 7,992,188 $ 4,407,813

10 Over 2 years: LT variability improved by 12.4 percent points Fill Rate 9.8 percent points It translates (after all the calculations) into $ MIL $$ savings in inventory cost (based on 3B revenue)

11 Lead Time- Inventory Calculator Demo

12 Frequency (how many times occurred) Lead Time LT Average LT is 14 days

13 In 68% of cases the LT was 14 ± 3 Lead Time

14 Desired Service Level (DSL) 95% DSL means that you need to have extra inventory to be protected from out-of-stocks in 95% of cases. The diagram below shows that you need about 70% extra Service Level (a chance to be in-stock) 95% 97% inventory. 98% 150% Additional Inventory 30% 40% 50% 60% 100%

15 Safety Stock Layer needed to protect from LT variability in 95% of cases Before LT variability Improvement Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

16 Safety Stock Layer needed to protect from LT variability in 95% of cases After LT variability Improvement

17 On-Time Shipping Apparel Retailer Implementation Year On-Time Shipments % % Improvement % % 51.0% % 00.0% % 15.0%

18 On-Time Shipping Apparel Retailer Implementation Year On-Time Shipments % % Improvement % % 51.0% % 00.0% % 15.0%

19 Lead Time-Inventory Calculator Link Current Link: This link will be sent in follow up . Other links on SCDigest and Compliance Networks web sites coming soon.

20 Resources Current Calculator Link: This link will be sent in follow up . Other links on SCDigest and Compliance Networks web sites coming soon. Mark Krupnik, Retalon Kevin Harris, Compliance Networks Copyright SCDigest