Lean Inventory …Lean Inventory …

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OverviewOverview

Illustrate a tools-based approach to Illustrate a tools-based approach to inventory optimizationinventory optimization

Use a Distribution Center exampleUse a Distribution Center example Introduce Introduce i-Leani-Lean Describe the analysis technique and Describe the analysis technique and

input datainput data Execute sample designExecute sample design General observations General observations

The ChallengeThe Challenge

Customer: A video games DC with Customer: A video games DC with 20,000 SKU’s20,000 SKU’s

Operations controlled using a WMS with Operations controlled using a WMS with manual overridesmanual overrides

Uses back-of-the envelope SKU slotting Uses back-of-the envelope SKU slotting techniques – would like to mechanizetechniques – would like to mechanize

Space constrained – would like to Space constrained – would like to eliminate dead stock and manage slow eliminate dead stock and manage slow moversmovers

Not particularly concerned about costsNot particularly concerned about costs

DC LayoutDC Layout

Pick-to-Light MezzaninePick-to-Light Mezzanine

Fast Moving CartonsFast Moving Cartons

Slow Movers/Dead StockSlow Movers/Dead Stock

Bulk Floor PileBulk Floor Pile

The The LeanLean Solution Solution

Establish & manage lean inventory levelsEstablish & manage lean inventory levels Reduce material carrying and handling costsReduce material carrying and handling costs Recommend optimal cycle and safety stock Recommend optimal cycle and safety stock

levels along with bin sizeslevels along with bin sizes Identify opportunities to correct both excess Identify opportunities to correct both excess

and inadequate inventory levelsand inadequate inventory levels Optimize existing and planned storageOptimize existing and planned storage Slot SKU’s based on cube, demand, picking Slot SKU’s based on cube, demand, picking

profile, storage media, affinity using CPOIprofile, storage media, affinity using CPOI Support unlimited “what if’” comparisons of Support unlimited “what if’” comparisons of

different inventory management strategies.different inventory management strategies.

Project ApproachProject Approach

Work with the primary contractor to gather Work with the primary contractor to gather bulk data from the customer, e.g., SKU bulk data from the customer, e.g., SKU information, and derive other reference datainformation, and derive other reference data

Construct an Construct an i-Leani-Lean database and validate its database and validate its content for both its accuracy in representing content for both its accuracy in representing the physical DC environment and its internal the physical DC environment and its internal data consistencydata consistency

Execute basic analyses to identify Execute basic analyses to identify opportunitiesopportunities

Provide slotting and dead/slow stock Provide slotting and dead/slow stock recommendationsrecommendations

Provide bin size and replenishment Provide bin size and replenishment recommendationsrecommendations

Basic TechniquesBasic Techniques• Apply the (demand x lead time) + safety Apply the (demand x lead time) + safety

stock “Pull” model at the SKU levelstock “Pull” model at the SKU level• Optimize SKU flow Optimize SKU flow • Focus on “important” SKU’s first Focus on “important” SKU’s first • Optimize bin sizes and storage media Optimize bin sizes and storage media

typestypes• Apply CPOI slotting strategy (Heskett)Apply CPOI slotting strategy (Heskett)• Connect analysis, design, and execution Connect analysis, design, and execution

systemssystems

i-Leani-Lean Analysis Modes Analysis Modes

• Design Mode – For “Greenfield” designs Design Mode – For “Greenfield” designs with unlimited storage media with unlimited storage media

• Normal Mode – Optimization of SKU Normal Mode – Optimization of SKU placement in limited existing storage placement in limited existing storage mediamedia

• Central Storage Design – For Reserve Central Storage Design – For Reserve storagestorage

Material Handling FlowsMaterial Handling Flows

SKU data input Template (A)SKU data input Template (A)

SKU data input Template (B)SKU data input Template (B)

i-Leani-Lean Analysis Summary Analysis Summary

• Operational decisions should be based Operational decisions should be based on dataon data

• Getting good data can be (is) tediousGetting good data can be (is) tedious• Establishing cost factors is difficult but Establishing cost factors is difficult but

may be a wake-up call for operational may be a wake-up call for operational processesprocesses

• Optimizing material flow may imply Optimizing material flow may imply radical changes to process and storage radical changes to process and storage strategiesstrategies

• Get rid of dead stockGet rid of dead stock

Other ObservationsOther Observations

Tribal knowledge may inhibit changeTribal knowledge may inhibit change Circumventing operational systems, Circumventing operational systems,

e.g., WMS, creates problemse.g., WMS, creates problems Costs Costs areare important important Expecting simple solutions to Expecting simple solutions to

complex problems may lead to …complex problems may lead to …

Lean InventoryLean Inventory … …

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