Inventory Management: The Nuts and Bolts

Agenda8:30-8:45 Session One: Introduction and Course Overview

8:45-9:00 Icebreaker: Vegetable Garden

9:00-9:30 Session Two: What is Inventory?

9:30-9:45 Session Three: Types of Inventory

9:45-10:00 Session Four: Key Players

10:00-11:30 Session Five: Setting up the Warehouse

11:30-11:45 Session Six: What Makes a Good Inventory Management System?

11:45-12:00 Morning Wrap-Up

12:00-1:00 Lunch

1:00-1:15 Energizer: Egg, Chicken, Dinosaur

1:15-1:30 Session Seven: The Warehouse Inventory Cycle

1:30-2:15 Session Eight: Identifying Demand

2:15-2:30 Break

2:30-2:45 Session Nine: The Receiving Process

2:45-3:00 Session Ten: Validating Inventory

3:00-3:15 Session Eleven: The Put-Away Process

3:15-3:30 Session Twelve: Maintaining Inventory Accuracy

3:30-4:00 Session Thirteen: The Outbound Process

4:00-4:15 Session Fourteen: Industry Trends

4:15-4:30 Workshop Wrap-Up

Session One: Course Overview

• Understand terms that are frequently used in warehouse management

• Identify the goals and objectives of inventory management, and measure your process against these goals

• Calculate safety stock, reorder points, and order quantities

• Evaluate inventory management systems• Identify the parts of the inventory cycle• Better maintain inventory accuracy

Session Two: What is Inventory?

• Inventory is a catalogue or schedule of property of a person, organization or estate; hence an account of goods and their worth.

• Inventory management is the direction or control of goods and materials stocked by an organization to provide continuity of production and customer satisfaction.

Session Two: What is Inventory?

Goals• To manage and control inventory• To carry appropriate stock levels• To reduce inventory carrying costs• To minimize stock-out costs• To improve ordering costs• To achieve & maintain stock accuracy

Objectives1. To effectively serve external and internal customers2. To maximize the potential to generate revenue and

limit costs from inventory transactions

Session Two: What is Inventory?

• Back-order• Cross-Docking• Distribution• FIFO• Lead Time • LIFO• Loading • Logistics• Order• Packing

• Picking• Product Number• Put-away• Receiving• Re-order Point• Returns• Safety Stock • Shipping• Stock-Keeping Unit

(SKU)• Warehouse

Session Three: Types of Inventory

Types of Inventory:• Anticipation Inventories• Fluctuation Inventories• Lot Size Inventories• Transportation Inventories

Classes of Inventory:• Raw materials and supplies to support production• Work-in-progress items (WIP)• Internal use only • Promotional• Finished goods• Purchased products for resale and distribution

Session Four: Key Players

• Customer service means supplying requested information/goods/actions to meet the expectation of the requestor.

• We can’t supply the information/goods if they’re not in stock!

• One of your customers is top management.• A well managed inventory can help reduce costs.

Session Four: Key Players

The Hiring Process:

• Know the job you are hiring for. Know the knowledge, skills, and abilities required to do the job right.

• Have a job description for every position. • If you take part in the interview process, be prepared

for behavioral and situational questions. • When the new employee arrives on the job, spend

some time giving him/her an orientation to the workplace and the job, and create an opportunity to tell the new employee what you expect from him/her.

Session Four: Key Players

Skills Checklist:AptitudeCommon SenseAnalytical AbilityIngenuityDecisivenessAssertiveness and InitiativeResponsivenessConscientious and PersistentSelf-reliance and FlexibilityTact and Cooperation

Session Five: Setting up theWarehouse

• Maximize your storage (space or cube) utilization

• Maximize your warehouse equipment utilization• Maximize your labor (employee) utilization• Reduce your product handlings• Maintain required product accessibility• Assure the desired product rotation or turns• Minimize your company’s operating expenses• Assure the protection of your company’s assets

Session Five: Setting up theWarehouse

Locations:• Picking • Replenishment • Long term storage

Location Identification:• Facility• Area• Aisle• Bay• Position• Level

Session Six: What Makes a Good Inventory

Management System?

• Categorize product by class, group, use, or department• Develop product item descriptions• List vendors (existing or potential)• Ability to establish estimated yearly usages• Ability to establish lead times• Set Safety Stock Levels• Set Order Quantities• Set Reorder Points• Record receipts• Record issues• Record balance on hand and quantity available.• Calculate number of turns per annum• Establish average monthly use• Establish maximum usage

Session Six: What Makes a Good Inventory

Management System?

Possible Computerized Systems

• Excel spreadsheets• Access databases• Tools available in existing software packages (such

as accounting or contact management)• Computer applications made specifically for

inventory management• Custom-made computer applications made

specifically for a particular company’s inventory management system

Session Seven: The Warehouse Inventory Cycle

Session Eight: Identifying Demand

Vilfredo Pareto: •A: 20% of items = 80% of annual sales•B: 30% of items = 15% of annual sales•C: 50% of items = 5% of annual sales

Session Eight: Identifying Demand

Order Quantity(No. of Mos. Supply desired x Avg. Usage) + difference

Reorder Point(Avg. Mo. Usage x Lead Time in Mos.) + Safety Stock

Safety Stock (Max. Monthly Usage – Avg. Monthly. Usage) x Lead Time in Mos.

Session Eight: Identifying Demand

Session Nine: The Receiving Process

• Consignor• Consignee• Purchase order number• Item stock number• Complete item description, including type, size, color,

specification number, serial numbers, etc.• Number of containers and number of units per

container• Total number of units received• Number of units short or over

The following information should be checked when receiving goods:

Session Ten: Validating Inventory

There are three ways to validate inventory:• 100 % accept method • Random sample method • 100% verification

If quality is not met, what procedures should be taken?

Session Eleven: The Put-Away Process

• Consolidate like inventory.• Minimize travel time.• Ensure correct placement.• Fulfill replenishments.• Fulfill security requirements.

Session Twelve: Maintaining Inventory Accuracy

Vilfredo Pareto: •A: Tightest controls•B: Moderate controls•C: Simplest controls

Session Twelve: Maintaining Inventory Accuracy

• Scanning Devices• Product Identification

* UPC* VICS* License Plating

• Inventory Counting Methods* Random Counts* Cycle Counts* Fiscal Count

Session Thirteen: The Outbound Process

• Picking Process• Packing Process• Loading and Shipping Process

Session Fourteen: Industry Trends

• Cross-docking • Third party warehousing• Just-in-Time Completion• Six Sigma

Are there other trends you have been seeing?

Thank you