inventory optimization report final
TRANSCRIPT
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CPE Inventory Optimization Project
July 30, 2008Javier Sanchez
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Inventory Optimization Report
Points of Discussion
Definition of the Problem
Root Causes
Current Process Map
Improvement Opportunities
Suggestions for opportunities found
Financial Benefits
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Problem Definition
Shipping costs in May increased $61k due toexcessive overnight shipments of CPE
Stock requirement analysis is manual, timeconsuming, and cumbersome
Suspect we may retain excessive stock in some
products (See Annex # 2 for Details)
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Root Causes
Shipping costs in May increased $61k due to excessive overnight
shipments of CPE Stock-out due to:
> Delay in approving PO
> Delay from Vendor in getting the PO in their system
> Delay in normal vendor shipping time frame
Re-Stocking analysis is manual, time consuming, and cumbersome Systems provide pieces of data that must be manually manipulated in
Excel to obtain:
> Field shipment orders
> Stock replenishment quantity
Suspect we may retain excessive stock Lack of generally accepted stocking methodology to manage stock
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Start
InventoryInformation Systems
Inventory Gets the reportOf products needed for
two week period
SalesSales Person enter
info. on MSS
Inv. Ships the productto Market Site
Inventory depletes stockfrom Warehouse Using
the Replenishment System
Inv. Package the Product
Market Sites Receiveequipment
Distribution to differentsites
Market Sites enters equipment intoMSS as equipment Available
Sites Receive OrdersTo install equipmentField Tech. Change MSS
Equipment from Available to In Service
Field Tech. Goes and InstallEquipment Field Tech. Deletes Equipment
From MSS.
Nuvox Bills the customer
$
Nuvox Bank
RICH PICTURE OFINVENTORY SYSTEM
(System # 1 )
Sub- System 2
Sub System# 3
Current Process High Level
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Current Process
INVENTORY HANDLING PROCESS
Inventory goesto MSS and pullReports in order
to find what'sneeded to be
shipped tomarket sites
Not Installed Report(NIR)
TSP ScheduleDrillable Report
Installed YTD Report(IR)
Cleaning Reports
Combine all TSP Reportsinto one
Called Total TSP
Conbine Total TSP intoNIR
Combine IR into NIR
Rename NIR to CPESummary Report
CPESummaryReport issent to
warehouseElectronically
Warehouseverifies reportwith currentinventory(Manually)
Warehouseprepares
material to beshipped
WarehousecreatesPOs of
inventorythat will beshipped.
Warehouseships the
product/s tomarketsites
Marketsites
receiveequipmentand enter it
into thesystem
Financialreceives
POs
electronically
POs
approved?
Yes
No
Request ofinstallation isneeded andMarket site
assigns serial #to customer POand change theclassifications
Market siteinstalls
equipment
FieldTechnicianreturn to thesystem anddelete partfrom thesystem.
End
Warehousereceives
confirmationelectronically
Warehousefax the POs
to Supplier
SupplierreceivesPOs and
send back aconfirmationemail with
delivery time
Supplierprepares
and sendsequipment
Warehousereceives
equipmentand store it
Warehousekeeps
copies ofopen POs
Confirmationnotice is store
on thecorresponding
Open PO
Warehouseattached
closes thePO with the
receiverfrom
supplier.
End
Delay Process
3 .1 .5 2 40 1 .5 3 .25
.5 .25 40 .1 .25 40 160 2
50.35hours/6.3 Days
261.72hours/32.71
Days
Non Valueactivities
Chance forImprovement
Non Value, but notaffecting the
process
NVA= 3TNVA=3
VA=0TVA=0
NVA= 1.5TNVA=247.1
VA=.5TVA=1.6
NVA= 160TNVA=245.6
VA=0TVA=1.1
NVA= 40TNVA=85.6
VA=0TVA=1.1
NVA= 0TNVA=45.6
VA=.25TVA=1.1
NVA= 40TNVA=45.5
VA=0TVA=.85
NVA= .25TNVA=5.5
VA=0TVA=.85
NVA= .1TNVA=45.6
VA=0TVA=.85
NVA= 1.75TNVA=5.25
VA=.75TVA=.85
NVA= .5TNVA=3.5
VA=0TVA=.1
NVA= 0TNVA=3VA=.1TVA=.1
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Improvement Opportunities
Less Regimented PO approval process
Automatic re-stocking analysis
Utilize bar code scanners to integrate withinventory system
Decrease supplier lead time
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Improvement Actions
Develop fully automated daily report to provide re-stock amounts and field shipping details. Field Shipping detail:
> Order #> CLLI> TSP Date> Market> Equipment
Re-Stock Amounts> Part Number> Quantity
.
Develop process to incorporate scanning devices to place inventory data into inventory system.
Enhance CPE approval process. Provide Harold with unilateral authority to replenish stock to system-driven stock level Generate daily/weekly reports to advise executive management of capital commitment Special capital purchase circumstances, such as TitleMax, will be handled ICB
Pursue new vendor supply strategy to reduce lead time to delivery. Vendor retain 2 months of stock on hand Commit to next day shipping Will probably have to guarantee payment for on hand stocked items
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New Process
Sub-System # 3
Start
Inv. Goes to the
System and gets areport of what is
needed to ship forthe market sites
Inv. Open the R.S.
model 100004-LG-XX and goes to
the Data BaseSheet.
On the Data Base,
update what isgoing to be
shipped as out ofstock.
Verify each
product on theupdatable
demand sheet
Does the productsays order Now
Create a PO for
what is indicatedto order on the
Updatable
Demand Sheet
Save thedocument and exit.
No
Yes
Fax PO to VendorAnd notify
Financial ofpurchases made.
Monitor POs for
fast delivery.
ReceivedEquipment using
Bar Code andstore it.
Update R.S onData Base Sheet
End
NOTES:
RECONCILIATION AND DEMAND MUST BEMONITORED ON A DAILY BASES
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Mathematical Model
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Daily Data Base
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Updatable Demand
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Financial Benefits
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Financial Benefits 1 Day
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Financial Benefits 5 Days
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Example of Calculation
Note:There is potential of 10 Extra Days of Savings if we negotiate a win winstrategy with our supplier.
Potential Savings off an additional $468,994
Based on the 16 CPE productssavings are:
One Day= $46,630
5 Days= $233,703
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Annex 1
ABC Classification
$0
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
$3,000,000
$3,500,000
$4,000,000
2431-16 2431-8 2432-24 2431-T1E1 VWIC-1MFT-T1 VWIC-2MFT-T1 2821 PVDM2-64 3845
Products
2007/2008
UnitCost
0
20
40
60
80
100
120
Items
Accumulative %
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Summary
Enhance PO approval process
Immediate one-time savings of $233,703
Automate Field distribution reporting Eliminate manual labor increasing accuracy
Automate the re-stock analysis system
Immediate one-time savings of $326,180~ Optimizes stock levels Minimizes capital commitment
Potentially decrease supplier lead time Additional potential savings of $ 468,994
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Annex # 2
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2020
0
200
400
600
800
1000
1200
2431-8 2431-
T1E1
2821 VWIC-
1MFT-
T1
PV
DM2-64
NM-
1T3/E3
VIC2-
2FXS
VIC2-
4FXS
HN-
404-
CP-1E-I
MinInv based on lead time/product
Current Inventory
Annex # 3 Current Inventory Levels