(331) SX.e WebUI Advanced Inventory Management10 Steps to Best Practices Inventory Management

Grant Howard, Grant W. Howard CompanyManchester, Michigan

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“Getting Results” - Taking Profits, Longevity, Growth and Responsibility to the Next Level Authority on “Best Practices” Inventory Management, Operational Efficiency, Systems Utilization Wholesale Distribution Degree, Many Years of Experience Works with Multiple Distributors, Associations and Software Systems, 80% of Time at

Distributors On-site Inventory Management, Operations and Systems Workshops/Conferences Multiple Boards of Directors and Advisor Boards Conceptual Designer Behind Infor’s SX.e, FACTS and A+ Advanced Inventory Management “AIM”

and other ERP Platforms Software Development, Enhancements and Specification/Design Work Our Expertise is “Best Practices” - Improving and Implementing Proven Practices that Work and

Drive Results - Profits, Longevity and Growth PLGR, MOT, PEM, PET, ACE

Grant Howard and GWHCO

10 Steps to Best Practices Inventory Management“Set Up, Utilization, Maintenance and

Driving Results”

The Big Picture Inventory Management and

Replenishment The 10 Steps to BPIM*Better Numbers - Steps 1-4Better Tools - Steps 5-7Driving Results - Steps 8-10

Take it Back

* Companies have Difficulty with Set Up (1), Replenishment (5), Proactive Maintenance (8) and Measurement (9) (Steps 1, 5, 8 and 9)

Company ObjectivesThe Big Picture

Customer Service Availability On-Time Delivery Accuracy

Product Quantity Price Other

Issue Resolution Fair Price

Profitability Revenue Generation

and Optimization Strategic Sourcing Margin Improvement Costs Reduction:

Freight – In, Out, Inter Co. Cost of Transactions – 4x Cost of Assets – Inv&A/R Cost of Errors/Fires Admin and Other Costs

PROCURE

SALES

WHSE&VA

Company Objectives Profitability, Longevity and Growth

Inventory Management and Replenishment

The Replenishment Model

The Replenishment Model addresses the two objectives of

Customer Service and Profitability

When to Replenish?What to Replenish and How Much?

What is Not Needed?

The Replenishment System

PNA/Level

Surplus Point

Line Point or Max

Order Point or Min

EOQ

Order/Replenishment Cycle

Lead Time

Safety

When, What, How Much? What is Not Needed?

Addresses the Objectives of

Service and Profits

What to Replenish and How Much?

FreightC to CC to P

When to Replenish?

Fill Rate

What is Not Needed?

C to CFill Rate

Usage and Lead Time

Order Cycle and EOQ

Stock Level and Dates

Surplus ($ Working)

“10 Steps”Best Practices

Inventory Management

Systematic approaches are 90% of stellar customer service at the lowest cost… The key is to devise systems that allow you to give the customers what they want every time; accurately, consistently and efficiently.

If you fix the system, the problem is eliminated for good.

Is it stock? Should it be? Is it time to replenish? How long has it been here? How many should we have? If your inventory system can’t answer these questions, you’re making your job of providing customer service at the lowest cost to serve a lot harder than it has to be.

9. Measurement and Monitoring

10. Controlled Replenishment and Maintenance

1. Parameters

2. Usage and Lead Time

3. Forecasting

4. Stock Level/PNA

5. Replenishment

6. TimeLine Analysis

7. Inventory Optimization

8. Proactive Maintenance

“Best Practices” Inventory Management – 10 Steps

Surplus Point

Line Point or Max

Order Point or Min

Safety Stock

Usage during Lead Time

Usage during Order Cycle

Economic Order QuantityPNA

Better NumbersSet Up, Data, Forecasting

and PNA Accuracy

Steps 1-4

Step 1: Parameters and Set UpDynamic, Smart and Multi-Level

Set Up and Parameter Maintenance is Continuous and Ongoing. Not Just at Start: The World is Dynamic, Things Change New Items at Beginning vs. Once

Established

Implement Smart Product Ranking

Dynamic – Use Hit rank or similar –Not all items are the same

Smart – Allows balance between Profits and Service, Hits and Cost, Return vs. Cost/Time (Exception reports)

Multi-Level – Company, Warehouse, Vendor, Pline, Item/Warehouse

By Path – Vendor or Internal Source

ICSR – The Big Picture (WebUI)

ICSR – Ranking (WebUI)

Product Ranking is Critical for: “Smart” Parameter Maintenance Good Exception Reporting Good Analysis/Priority Reporting

ICSR – Ranking, Detail Ranks (WebUI)

“Smart Set Up” Rank based on Hits Usage:

Months Based on Rank Seasonal Trending

Lead Times: Min/Max by ARP Calculation Method Exception Reporting

Safety Stock: Based on Rank Ability to Utilize LT (% vs. Days) Safety Analysis

Order Point Adjusters: ASQ and 5Hi Summary Analysis Inquiry

Full RC/XC and EOQ Control Buyer’s Control Center:

Priority Setting Color Scheme Setting

Exception Control Center: Tmins with Low Activity Tmins to Expire Products about to Unfreeze OAN, FC99, DNR with Hits

Smart Transfer Rounding

Step 2: Data Collection and Correction

Usage Buckets: Sales, Transfers, Lost Sales, Exceptional Sales, and Manual/Automated OverridesLead Time Buckets: P/Os, Transfers,

and Manual Overrides

Where Does Most of this Data Come From?

Sales/Transfer HistoryLost Sales

Exceptional Sales/XferHuman Input

Usage/Demand

Step 3: Forecasting

Product RankingReset Dynamic ParametersAverage Usage/DemandReview/Order/Transfer CycleSafety, Order Point, Line Point, EOQException Center Reporting

Step 4: Stock Level/PNA

On-hand Integrity – PET, WMS, CC’s :By the Way you do Things - PETCycle Counts/Suggested CountsWarehouse Management System

Paperfloat Control:Open Doc Control CenterProper Dates

Daily

On-Hand- Committed

Available

On-Hand- Committed+ Incoming

Stock Level/PNA

1. Parameters

2. Usage and Lead Time

3. Forecasting

4. Stock Level/PNA

“Best Practices” Inventory Management – 10 Steps

Surplus Point

Line Point or Max

Order Point or Min

Safety Stock

Usage during Lead Time

Usage during Order Cycle

Economic Order QuantityPNA

Better ToolsReplenishment, Timeline

and Inventory Optimization

Steps 5-7

Inventory Management is at the Time of Replenishment...

“When, What, and How Much”

Everything Else is Inventory Correction.

Step 5: Replenishment

PNA/Level

Surplus Point

Line Point or Max/EOQ

Order Point or Min

EOQ

Order Cycle

Lead Time

Safety

When to Replenish$PO $Target* Replenish (Y/N) WBOP

$1,263 $1,000

$694 $2,500

Order Cycle Days Last Line Buy Replenish (Y/N) WBOP

30 36

14 3

* Dollars, Weight, Pieces, Cubes

Replenishment TransactionsTrans/Year Cost/Trans Total Cost

70’s 2 25.00 50.0080’s 4 10.00 40.0090’s 6 5.00 30.0000’s 12 3.00 36.0010’s 24 2.00 48.00Xxx 48 1.50 72.00Xxx 48 0.13 6.24We have used Technology to Increase the number of Transactions we can do…

We have not done as well at using Technology to Reduce the Cost per Transaction

Order PointWorthy Items Below OPStellar Fill Rate – When

Line Point, EOQ and RoundingMinimize Freight, Cost to Carry and Cost to Purchase

Improving Profitability – What/How Much

ICSR – Priority (BCC) (WebUI)

POERA – Demand Center (BCC) (WebUI)

On-line, Priorities, One-Stop, Drill Down, Maintenance, Targets

POERA – Demand Center (BCC) (WebUI)

Worthy Item Below Order Point or “Hot” Backorder Utilize Company Long Term Surplus (Please

Take) Meets Vendor Target – Generate P/O Below Vendor Target to Target – Meets 1 of 3

Golden Rules – Generate P/O:1. If you can raise your order cycle by 30 days or less and meet target2. Within $1000 Dollars or 20% remaining to target3. Half way through the Order Cycle*Use the Meet Vendor Target to do Properly* Remember the more that you use this tool the less likely you will be able to do so in the future

Consolidate Plines/Vendors and/or Warehouses to make Target – Generate P/O

Negotiate Reduced Vendor Target (One Time or Permanent) – Generate P/O

Cannot Meet Target Buy – Options:1. Utilize Company Short Term Surplus (Borrow)2. Find Alternate Source3. Look for a Substitute to Offer the Customer4. Assemble/De-assemble5. Utilize Branch Below Short Term Surplus (Approval to Take)6. Ask Customer if they can Wait7. Direct from Vendor (Pay Freight)8. Place Short or Emergency Buy P/O (Pay Freight) –Use the Meet Vendor Target to do Properly

Stellar Customer Experience at the Lowest Cost to ServeFill Rate and On-Time

Freight, Cost to Carry and Cost to Purchase

Proper Items and Order Quantity

1. Items Below Line Point Up to Line Point* – Freight and Cost to Carry

2. Compare to EOQ* – Cost to Carry and Cost to Purchase

3. Round to Standard Pack – Cost to Buy/Break Pack

* Assure both objectives, largest of two

Increase/Decrease

Proactive Maintenance Goes Below Order Point or Too Late before Expected

PNA Change On-hand Change – OE,WT, WO, PO, Stock Adjust Committed/Incoming Change – OE, WT, WO, PO

Stock/OAN Flag and ARP Correct Usage*:

Usage Buckets Correct – Lost Sale, Exceptional Sale, Correction, Smoothing

Usage Method: Backwards or Seasonal Trending Issues if Seasonal Status/ARP Correct for Roll Up

Lead Time Safety Order Point Adjusters (Calc, T.Min.OP, ASQ, 5HI) Order Cycle and EOQ (Not Ordering Enough)

Self-Inflicted: Utilizing Increase/Decrease Too Often/Incorrectly doing Proactive Maintenance Not Ordering Enough Last Time (System or Emotional) Waiting Too Long

Notes: Remember: Hits and Cost 80% of Time will be Usage or PNA Shift Monthly Ratchet caused by Monthly Usage Buckets * If Usage is Low; Waits Too Long (OP) and Does NOT

Order Enough (LP and EOQ)

If the wrong quantity is ordered and/or the item is not addressed

then the issue is not resolved.

Stellar Customer Experience at the Lowest Cost to Serve

Priority – Customer Experience vs. Total CostWorthy Item Below Order Point – Customer ExperienceCorrect Order Quantity – Assures until Next Replenishment and

Minimized Total CostMeeting Target – Increase/DecreaseItem Below Order Point Before Expected/Broken – Fix It

Step 6: Time Line Analysis

Identification and Prevention are the Key

Out

0-30 days

In Out

30/+ daysToo Early

Incoming and will be early or not needed

Out

Incoming and will be late

0/- daysToo Late

PNA/Level

Surplus Point

Line Point or Max/EOQ

Order Point or Min

EOQ

Order Cycle

Lead Time

Safety

Step 7: The Proper Way to Turns and ROIUnderstand the Impact: Excess and Defective:

– No one wants or needs– Formalized Program– Formalized Goals

Line Point and EOQ/OQ:– “What” and “How Much”– Be Careful – Freight, C to C and

C to P Departments Order Point - Safety Stock:

– “When”– Be Careful - Customer Service

Low Risk

High Risk

Other Areas for Improvement:– The Stocking List– Valid and Reasonable Committed– Proper use of Future Orders– Unavailable Inventory

1. Parameters

2. Usage and Lead Time

3. Forecasting

4. Stock Level/PNA

5. Replenishment

6. TimeLine Analysis

7. Inventory Optimization

“Best Practices” Inventory Management – 10 Steps

Surplus Point

Line Point or Max

Order Point or Min

Safety Stock

Usage during Lead Time

Usage during Order Cycle

Economic Order QuantityPNA

Driving ResultsProactive Maintenance,

Measurement and Controlled Replenishment

Steps 8-10

Step 8 – Proactive Maintenance (ICAMU)

1. OAN/DNR/Non-Replenished/NS* with Hits2. Usage Trending Exceptions (If Seasonal)3. T.Min Usage to Expire (FACTS)4. Lead Time Exceptions5. T.Min Order Point to Expire6. Stock Out/Low/Exceptional Usage (If Utilizing)7. Freeze to Expire (If Utilizing)8. ASQ/5Hi Exceptions9. T.Min Order Point with Low Activity10. Safety Analysis

Use Hits and Cost: Priority, Customer

Importance and Cost of Investment

If there is no measurement, then it is all hearsay. Data-free

conversations and decisions will cause lots of frustrations, cost lots

of money and result in lots of disappointments...

Step 9: Measurement

Exceptions and Improvement

Long Term SurplusICRIS

TQM Summary and Detail Credits

SMRL

Margin Exception and Price Optimization

OEER

Customer ExperienceICRIF

Inventory TurnsICRIT

Measurement – Sun

Measurement – Compass

This is the Monthly Meeting

Measurement – GPS (GFT)

Additional Information:Freight Spend (In, Inter, Out) and %’sYear End Objective and %ObjectivePrevious Year Actual and % TY vs. LYIndustry Best and Industry Average

Comparative - Buyer

Inventory Mix by Rank

Uncontrolled Replenishment and Maintenance Leads to

Uncontrolled Results

Step 10: Controlled Replenishment

Take it Back

9. Measurement and Monitoring

10. Controlled Replenishment and Maintenance

1. Parameters

2. Usage and Lead Time

3. Forecasting

4. Stock Level/PNA

5. Replenishment

6. TimeLine Analysis

7. Inventory Optimization

8. Proactive Maintenance

“Best Practices” Inventory Management – 10 Steps

Surplus Point

Line Point or Max

Order Point or Min

Safety Stock

Usage during Lead Time

Usage during Order Cycle

Economic Order QuantityPNA

Inventory Management 10 Steps – SX.eNumbers:1. Parameters/Set Up: ICSR, ICSD, ICSL, ICSP, ICSW2. Data: OEET, WTET, POET3. Forecasting: ICAI, ICAR, ICAMM4. Stock Level Accuracy: WMS, CC’s, BIIS

Tools:5. Replenishment Process: PO/WTERR, PO/WTERA6. Timeline Analysis –Too Late and Too Early: ICRIG7. Inventory Optimization: ICRIS, ICROU, BIIS

Maintenance and Measurement:8. Proactive Maintenance: POERA, ICAMU, Mass Update9. Measurement: ICRIF, SMROL, ICRIT, ICRIR

Missing Steps - Missing Results Expectations?

10. Controlled Replenishment - The

Entire Company

There is Enough Your Company Can’t Control...

“It’s difficult to get a return on your assets,” he adds. “The more inventory you have, the

more exposure you have to it becoming dead inventory. That inventory is the only aspect of the business that is entirely in

your control, and has everything to do with your success.”

Industrial Distribution

A+ Network Meeting – Discuss AIM on A+, Sunday 10:30am – 11:30am

SX.e AIM Network Meeting – Ask the Expert Panel Discussion, Sunday 1:30pm

FACTS Network Meeting – Inventory Replenishment Q&A, Sunday 3:00pm

(331) SX.e WebUI Advanced Inventory Management – 10 StepsMonday, 1:30pm – 2:15pm

(161) ProAdvisor - BI that is Goal-Oriented and Results-FocusedTuesday 8:00am – 8:45am

(102) Balanced Objectives, Execution Excellence and Smart MeasurementTuesday, 1:30pm – 2:15pm

(162) ProAdvisor – A Closer LookTuesday, 2:45pm – 3:30pm

3 Days Best Practices Inventory Management, Novi Michigan May 12th–14th, 2020

Thank You

(331) SX.e WebUI Advanced Inventory Management�10 Steps to Best Practices Inventory ManagementGrant Howard and GWHCO10 Steps to Best Practices Inventory ManagementCompany Objectives�The Big PictureCompany Objectives Profitability, Longevity and GrowthInventory Management and ReplenishmentThe Replenishment ModelThe Replenishment System“10 Steps”�Best Practices Inventory ManagementSlide Number 11“Best Practices” Inventory Management – 10 StepsSlide Number 14Step 1: Parameters and Set Up�Dynamic, Smart and Multi-LevelICSR – The Big Picture (WebUI)ICSR – Ranking (WebUI)ICSR – Ranking, Detail Ranks (WebUI)“Smart Set Up” Step 2: Data Collection and CorrectionStep 3: ForecastingStep 4: Stock Level/PNA“Best Practices” Inventory Management – 10 StepsSlide Number 24Step 5: ReplenishmentWhen to ReplenishReplenishment TransactionsSlide Number 28ICSR – Priority (BCC) (WebUI)Slide Number 30Slide Number 31Worthy Item Below Order Point or “Hot” BackorderProper Items and Order QuantityIncrease/DecreaseProactive Maintenance �Goes Below Order Point or Too Late before ExpectedStellar Customer Experience at the Lowest Cost to ServeStep 6: Time Line AnalysisStep 7: The Proper Way to Turns and ROI“Best Practices” Inventory Management – 10 StepsSlide Number 41Step 8 – Proactive Maintenance (ICAMU)Step 9: MeasurementTQM Summary and Detail Credits�SMRLMeasurement – CompassMeasurement – GPS (GFT)Comparative - BuyerInventory Mix by RankStep 10: Controlled ReplenishmentSlide Number 55“Best Practices” Inventory Management – 10 StepsInventory Management 10 Steps – SX.eThere is Enough Your Company Can’t Control...Slide Number 59Slide Number 60