1.  2005 Grant W. Howard Company 1 Grant W. Howard 13214 Wallace Road Manchester, MI 48158 (734) 428-0529 ghoward@gwhco.org “Best Practices” Inventory Management The Next Level Profitability, Longevity and Growth

2.  2005 Grant W. Howard Company 2 Our Discussion Today n The Big Picture n The Replenishment Process n Getting Results: –Customer Service –Profitability n Systems Utilization n Some Final Thoughts Through Slide 28 Today

3.  2005 Grant W. Howard Company 3 ProfitabilityLongevityGrowth Warehouse Sell Procure Customer Service Vendor Performance Employee Happiness Education and Understanding Communication, Structure, and Team Systems and Tools Processes and Procedures Owner’s Returns and Happiness The Fundamental Tree Service, GM Improvement, Asset Manage- ment, Efficiency, Accuracy

4.  2005 Grant W. Howard Company 4 Profitability, Longevity and Growth Profitability ($&%): n GM Improvement ($&%): –Sales Increase - Loyalty: »Sell Price x 2 »Velocity Pricing »Lost Business and Backorders »More of Customer’s Business »New Business –COGS Decrease/Supplier Negotiations n Expense Reduction: –Asset Management: »Freight Reduction »Cost to Carry Reduction Rifle Approach Surplus, Safety Stock, RC/OC/OQ »Replace Freight & Inventory with... –Efficiency and Accuracy: »Cost to Replenish Reduction –Replace Costs with... Longevity: n Customer Loyalty: –Customer Service: »Fill Rates »Backorder Handling »On-Time Delivery »Accuracy - Product, Price, Quantity, Terms –Ability to Solve Customer Issues –Use Technology to... n Being Dynamic - its Critical: –Adaptability to Market Changes –Use Technology to... Growth: n Existing Customers: –Lost Sales and Backorders –Depth of Customer’s Business n New Customers

5.  2005 Grant W. Howard Company 5 Procure: n Inventory Management/Control n Operations n Sales n Marketing n Systems and Technology Warehouse: n Operations n Inventory Management/Control n Systems and Technology n Sales n Marketing Sell: n Sales n Marketing n Inventory Management/Control n Operations n Systems and Technology Seems to be a Pattern? Where does Management fit into all of this? Profitability, Longevity and Growth

6.  2005 Grant W. Howard Company 6 Customers: n Availability n Backorder Handling n On-Time Delivery n Accuracy –Product –Quantity –Price –Terms n Win-Win n MEASURE Vendors: n Not Just Price n Win-Win n MEASURE Employees: n Want to do a Good Job n Balanced Objectives/Team n Tools, Processes, EDUCATE! n Remove Stress, Give Method n Win-Win n MEASURE Profitability, Longevity and Growth

7.  2005 Grant W. Howard Company 7 n Communication, Structure and Team: Companies need to have a team concept, KNOWN balanced objectives, with a way to get there - Management! n Systems and Tools: Companies need to understand and use more than 20, 30, 50% of their systems! n Processes and Procedures: Companies need to have closed-loop, actual working processes and procedures! n Education and Understanding: Companies need to education their people and help them be part of the solution! Profitability, Longevity and Growth

8.  2005 Grant W. Howard Company 8 Who’s Involved?

9.  2005 Grant W. Howard Company 9 Inventory Management Getting Results When, What, How Much

10.  2005 Grant W. Howard Company 10 The Replenishment Model A Good Replenishment Model addresses the two objectives of Customer Service and Profitability When to Replenish? What to Replenish and How much? What is incoming and will be late? What is incoming and will be early or is not needed? What is not needed?

11.  2005 Grant W. Howard Company 11 “When, What and How Much” n “When to Replenish” –Target/Incentive and/or Review Cycle - Profits –Worthy Items Below Order Point with Target/Incentive and/or RC Considerations - Profits and Service n “What to Replenishment” –Line Buy (Make Target/Review Cycle) –Fill In/Emergency Buy –Transfers –Do Nothing n “How Much to Replenish” –Up to Line Point/Remaining Cycle (Cycle Coverage - Freight/C to P) –Compare to Suggested Order Quantity (EOQ/Class - CtoC and CtoP) –Minimum Run –Vendor/Transfer Package Rounding PNA/Level Surplus Point Line Point or Max/EOQ Order Point or Min EOQ Order Cycle Lead Time Safety

12.  2005 Grant W. Howard Company 12 Data Usage - OE/WT Lead Time - PO/WT Level/PNA Info - OH & Paperfloat Purch Hist Set-up “Smart” Set-up Co. and Whse. Product Pline Product Master Product Whse. The Numbers Hits/Ranking Order Cycle Ave Usage, Safety, OP, LP, Order Quantity Replenishment Buyer’s Ctrl Center Items BOP/Priority Timeline Analysis Too Late Too Early Surplus Inventory External/Lng. Term Internal/St. Term Measurement Fill Rate, BO’s Turns, Excess, Mix T&E, GMROI Maintenance One Stop Inq/Maint Proofs/Mass Update Exc Control Center The Tools Data to Info

13.  2005 Grant W. Howard Company 13 Data Usage - OE/WT Lead Time - PO/WT Level/PNA Info - OH & Paperfloat Purch Hist Set-up ICSR - “Smart” ICSD - Whse ICSL - Pline ICSP - Prd Master ICSW - Prd Whse The Numbers ICAI - Rank ICAR - RC ICAMM - AMU, Safety, OP, LP, OQ Replenishment POERR/WTERR POERA/WTERA - BCC Timeline Analysis ICRIG - Too Late ICRIG - Too Early Surplus Inventory ICRIS - Ext/LT ICRIS - Int/ST Measurement ICRIF - Fill Rate ICRIT - Turns ICRIR - T&E Maintenance POERA - One Stop Proofs/Mass Update ICAMU - ECC The Tools Data to Info

14.  2005 Grant W. Howard Company 14 Know the Right Things to Do Do these Things Right Inventory Management is at the Time of Replenishment, the “When, What, and How Much”, Everything Else is Correction.

15.  2005 Grant W. Howard Company 15 Getting Results!

16.  2005 Grant W. Howard Company 16 Service - Fill Rates? n How well a business meets its customer’s needs - pulse of customer’s happiness/loyalty. n What to Measure: Fill Rates = Shipped/Ordered Quantity: 9 out of 10 = 90% Line Item SC: 9 out of 10 = 0% Order Ship Complete? n What Should Fill Rates Be? n The Report is Broken? n Look at “First Pass” Orders - EDI, Fax, Internet, etc for true fill rates and backorder percentages n Only one way to better Fill Rates - The Right Inventory. Two ways to the Right Inventory...

17.  2005 Grant W. Howard Company 17 Profits - Turns? ROI? Freight, Cost to Carry and Cost to Purchase Maximize the Bottom Line C to PTurns 80’s$10.002-3 90’s$5.003-6 00’s$2-3.006-10 EDI/VMI$0.13? Many companies are increasing the turns, but the infrastructure does not support it; bottom line, longevity and growth are all suffering! Customer Service, GM Improvement, Efficiency, Accuracy, Asset Management Profitability Turns

18.  2005 Grant W. Howard Company 18 Turns What is it Measuring - Profits? J M/AJ/JS/ODC/ITurns 1.00s1.251/11 c1.00 1.00s1.25s1.252/12 c1.00c1.00 1.00s1.25s1.25s1.25s1.254/14 c1.00c1.00c1.00c1.00 CGMT&E GM%GMROI.25.25 20%20.25.50 20%40.251.00 20%80 Turns DOES NOT measure Profits, Turns is an Indicator of Profits Turns is a Measurement of Utilization and Efficiency - i.e.., C to C Turns is a one-side Indicator of Profitability, it looks at C to C... - What about Margin, Freight, C to P and SERVICE? R O I Inventory = Dollars! How many Times the Dollars are used to do Something

19.  2005 Grant W. Howard Company 19 Turns 4 5 6 7 Margin 35 30 25 20 Return 140 150 140 The “Whole” Picture Inventory Management is not only Turns Customer Service Improvement - Availability, OTD, BO Handling Gross Margin Improvement - Sell Service (Price) and COGS Expense Reduction - Freight, Cost to Carry, Cost to Replenish Inventory Management is Bottom Line, Longevity and Growth 7 Turns & 4% Bottom Line or 5 Turns & 7% Bottom Line

20.  2005 Grant W. Howard Company 20 Return on Investment GMROI: = Turns CGM% = COGSGM Ave InvCOGS =Sls TurnsGM% =SalesGM Ave InvSales =GM Ave Inv x x x x x x Turns: =COGS (+ $Transferred) Ave Inv T&E: = Turns GM% = COGSGM Ave InvSales No Directs, Non-Stocks or Pass-Throughs

21.  2005 Grant W. Howard Company 21 Inventory Management Objectives Customer Service Availability (Fill Rates) Proper Backorder Handling On Time Delivery Accuracy: Item, Quantity, Price Profitability (ROI) GM Improvement (Sales and Cost) Freight Considerations - OC Analysis Efficiency & Asset Mgt: CtoC and CtoP Surplus Inventory & Safety Inventory Turns/Days supply, ROI/T&E/GMROI Watch the C to P (Purchasing/Replenishment, Receiving & Put-away, A/P) Watch the C to C (Warehousing, Handling, Obsol. & Shrink, Taxes, Ins, Interest) ServiceProfits

22.  2005 Grant W. Howard Company 22 1. Right Inventory not Suffering because of Wrong 2. Controlled Replenishment 3. Stocking Policy 4. Good Numbers and Proper Use of Them (OP, Level, LP, and OQ) - Path to Service: –Replenish at Order Point - Prio –Usage: Lost Sales, DP –Freight/C to C vs Service –Line Buy vs Emergency Buy –Understand LP and OQ Effect Customer Service Availability, Backorders, OTD, Accuracy 5. Operations: –Backorder Policy and Handling –On-Time Delivery –Accuracy of Shipments and Billing 6. Fill Rates - Monitor, Drill Down, Find Areas of Improvement Back to Basics

23.  2005 Grant W. Howard Company 23 7. Understand and Use: –Customer Buying Habits –Timeline Analysis –NOOS Policy and Procedure –Smart Selling/Transferring 8. Follow LP and EOQ Suggestions: –Too many Fires –BOP but not at Target Problems 9. “Never-Arrive” Incoming 10. Safety Stock Increase: –Safety Analysis (Over Utilizing) –Safety Increase: »Use a Rifle Approach »Watch the Profits Stellar Customer Service does not have to drive your inventory through the roof, it just has to be done smart. Customer Service Availability, Backorders, OTD, Accuracy Keys to Good Fill Rates

24.  2005 Grant W. Howard Company 24 Inventory Management Objectives Customer Service Availability (Fill Rates) Proper Backorder Handling On Time Delivery Accuracy: Item, Quantity, Price Profitability (ROI) GM Improvement (Sales and Cost) Freight Considerations - OC Analysis Efficiency & Asset Mgt: CtoC and CtoP Surplus Inventory & Safety Inventory Turns/Days supply, ROI/T&E/GMROI Watch the C to P (Purchasing/Replenishment, Receiving & Put-away, A/P) Watch the C to C (Warehousing, Handling, Obsol. & Shrink, Taxes, Ins, Interest) ServiceProfits

25.  2005 Grant W. Howard Company 25 Profitability GM & Expenses (Freight, CtoC, CtoP) 1. Stellar Customer Service 2. Controlled Replenishment 3. Stocking Policy 4. Good Numbers and Proper Use of Them (OP, LP, OQ, Level) - Path to Profitability: –Up to LP, OQ, Min, Package –Usage: Exceptional, DP –Targets/Incentives Properly –Line Buy vs Emergency Buy –Availability (Sales, GM, Fires) 5. Vendor Performance and Negotiations 6. T&E and/or GMROI - Monitor, Drill Down, Find Areas of Improvement Back to Basics

26.  2005 Grant W. Howard Company 26 Profitability GM & Expenses (Freight, CtoC, CtoP) 7. Excess and Defective Control: –Prevention –Disposition 8. Order Quantity Reduction: –OC/RC (LP) Reduction: »OC/RC Analysis/Path s, Watch Freight »Lower Targets - Negotiate »C to P Departments Tools/ Efficiency –Suggested OQ Reduction (EOQ): »Watch C to P Departments »Proper C to C 9. Safety Stock Reduction: –Safety Analysis (Not Utilizing) –Safety Reduction: »Improve the Process »Use Rifle Approach »Watch the Service 10. Other Reductions: –“Never-Ship” Committed –Duplicate Products and Lines Turns the Right Way! Balanced Objectives - Increase turns/decrease inventory but DON’T EFFECT SERVICE! Reduce Inventory/Increase Turns

27.  2005 Grant W. Howard Company 27 PNA/Level Surplus Point Line Point or Max/EOQ Order Point or Min EOQ Order Cycle Lead Time Safety Profitability GM & Expenses (Freight, CtoC, CtoP) Understand the Impact Areas: n Excess and Defective: –No one wants or needs –Control the Feelings –Let it Roll, Let it Go –Be Careful - C to C/Mix –Cost of Disposition n Line Point and Order Quantity: –“What” and “How Much” – Be Careful - C to P Departments n Order Point - Safety Stock: –“When” –Be Careful - Customer Service Least Risk Most Risk

28.  2005 Grant W. Howard Company 28 Surplus Inventory Disposition BOP/GAP - Put of the fire: Short or Long Term BLP/Sugg Xfers - Use it where you can: Long Term Teach branches to use LT first. Don’t borrow stock and put branch in “need”. 1. Stock Balance: (“X” Months Supply) - With “To” branch approval/Before Buy 2. Sell Above Cost: Customer, Other Distributor 3. At Cost: Sell at cost, Return at cost with no charges (freight, restock) 4. Below Cost: Sell below cost, Return below cost and/or with charges 5. Sell Above “Write-off” Cost: Garage/Fire Sale, Flea Market, Auction House, Liquidation House 6. Dump at “Write-off” Cost: Donate, Scrap, Dump

29.  2005 Grant W. Howard Company 29 How Much of the System is Your Company Using?

30.  2005 Grant W. Howard Company 30 “Best Practices” Inventory Management Improve Customer Service, GM, Asset Management, Efficiency, and Accuracy n Better SKU Coverage - System and Buyers –50 - 70% SKU Coverage to 85-97% –5-25,000 SKU/Buyer to 40,000-100,000+ n Improved Time Management n Improved Priority Setting n Improved Efficiency n Improved Accuracy n Technology and Core n Replace Inventory with Information n Rifle Approach n Better Numbers and Better Tools n Ability to Balance Profits and Service

31.  2005 Grant W. Howard Company 31 “Smart” Parameters Product Record Product Line Record Vendor Record Warehouse Record Company Record Table Driven/Automated Depth Watch Hardcoding Balanced

32.  2005 Grant W. Howard Company 32 Economic Order Quantity (EOQ) The EOQ formula minimizes the “Cost of Reordering or Purchasing” and the “Cost of Keeping or Carrying” which develops the lowest total hidden inventory costs - the lowest total inventory costs. The “How Much” decision affects your bottom line and service! 24 x Avg. Monthly Usage x Cost to Purchase (“R”eorder cost) Unit Cost x Cost to Carry (“K”eep cost) C to CC to P Cost Per Unit Ordered EOQ Total Cost Cost to Carry (“K”eep Cost) Cost to Purchase (“R”eoder Cost ) Quantity Ordered 1. Not less than “x” weeks supply (1 week) 2. Not more than “x” weeks supply (1 year)

33.  2005 Grant W. Howard Company 33 EOQ Usage Rate1 Item Cost $100.00 Cost to Carry24% Cost to Purchase$4.00 EOQ2 $100 Month Usage, 2 Month Supply Usage Rate100 Item Cost $1.00 Cost to Carry24% Cost to Purchase$4.00 EOQ200 $100 Month Usage, 2 Month Supply $Mth UsageMth’s Supply$Inv$CtoC$CtoPM’s Sup (2.00CtoP).01200 (16.67 years)2.004.004.00141 (11.75 years).1063 (5.25 years)6.304.004.0045 (3.75 years) 120 (1.67 years)204.004.0014.1 (1.18 years) 106.3 (189 days)634.004.004.5 (135 days) 1002 (60 days)2004.004.001.41 (42 days) 1,000.63 (19 days)6304.004.00.45 (13.5 days) 10,000.2 (6 days)20004.004.00.141 (4.2 days) 100,000.063 (1.9 days)6,3004.004.00.045 (1.35 days) 1,000,000.02 (.6 day)20,0004.004.00.014 (.42 day) $CtoC = $Inv x Month’s Supply x 1/2 x 2%(1/2 for Average Inventory, 2% Monthly CtoC) What about freight percentage and RC days?

34.  2005 Grant W. Howard Company 34 Paperfloat Control

35.  2005 Grant W. Howard Company 35 Buyer’s Control Center/Workbench On-line, Priorities, One-Stop, Drill Down, Maintenance, Targets

36.  2005 Grant W. Howard Company 36 Making Targets Properly General rules of thumb: n Days n Dollars n 1/2 way through OC/RC Cost to Carry vs Freight, Price, and Service: n Key is equal days supply n Increase or Decrease n Use for Proper Emergency Buys/Fill-ins

37.  2005 Grant W. Howard Company 37 $Discount/Increase $C to C $Discount/Increase Quantity Negative Positive Break Even Max. Potential Discounts and Price Increases Break Even (Days) = (2 x Discount% / Monthly C to C) x 30 Maximum Potential Savings (Days) = (Discount% / Monthly C to C) x 30 This is total days supply to have on the shelve, not to buy. Use the “up to vendor target logic*” (change order cycle days) to meet the days supply. *This method works well for periods less than 90 days supply (seasonal or large swing items - be careful). Be aware of future freight, minimum considerations, fill ins, NS and OAN items. If targets are involved, be sure to fill in the entire line not just the fast movers or work a deal.

38.  2005 Grant W. Howard Company 38 Time Line Analysis InOut 7-30 days Ideal Timeline OutIn 0 + days Too Late Timeline InOut 30 + days Too Early Timeline Identification and Prevention are the Key Doesn’t matter if late if didn’t need Doesn’t matter if on time if needed earlier

39.  2005 Grant W. Howard Company 39 Surplus Inventory Responsibility Coordination Prevention Identification Disposition Goals/Plan CONTINUOUS

40.  2005 Grant W. Howard Company 40 “Smart” Monitoring Safety Stock - Service and Turns Safety Stock Level X X X X X X X X X X X = Actual stock available at time of receiving Stock out X Properly managed safety stock will result, over time, in this configuration of remaining stock levels at time of receiving the replenishment PO. Impossible task if done manually. 75% 25% 50% Enhancement automates the monitoring.

41.  2005 Grant W. Howard Company 41 If there is no measurement, then it is all hearsay. Data-free conversations will cause lots of frustrations, cost lots of money and result in lots on disappointments... Use measurement and monitoring to confirm results and to drill down and find areas of improvement. Be sure to use a “aimed” (rifle) approach rather than a broad (shotgun) approach, or it will be lots of $$$ and probably disappointing!

42.  2005 Grant W. Howard Company 42 Measure Results Customer Service: n Availability (ICRIF & SMRL) n Safety Analysis (ICAMU) n Accuracy: –Actual and Billing –Product (CM%) –Quantity (CM%) –Price (CM%) n On-Time-Delivery n Backorder Handling (ICRIN) n Customer Defection (SMAC) Profits and ROI: n Surplus - Prevention & Disposition (ICRIG & ICRIS) n RC/OC/XC and OQ: –Freight Dollars - As percentage of sales –Turns - Really C to C and C to P (ICRIT) –Turn and Earn - ROI (ICRIR) n Safety Analysis (ICAMU) Vendors? Employees? Efficiency? Accuracy? Do better on both sides!

43.  2005 Grant W. Howard Company 43 Vendor Performance and Negotiations - It’s not just Price n Lower COGS n Lower Freight Minimums n Multiple Drops for Freight n Combined P/O’s for Minimum n Freight Paid Fill-ins n Fill Rates n Consistent Lead Times and OTD n Accurate Shipping (Blanket Receiving) - Product, Quantity, Price n Good Backorder Handling n EDI/VMI/2-Way Information Flow - B2B n Automated Product and Pricing Updates n RGA’s on New Items n Excess Inventory Returns n Win/Win - Partnership

44.  2005 Grant W. Howard Company 44 “Best Practices” Better Numbers - Order Point n Usage Data and Calculation: –Lost Sales/Exceptional Sales Capability –“Smart” Exception and “Auto” Correction –“Path” Exception Reporting –Flexibility to Where Usage Placed for Shipments, Backorders, and Credits –Monthly, Weekly, Daily, Transaction Buckets –DP/MRP Capability –Flexibility with Method and Window by Rank –Seasonal Capabilities: »Individual “Parameter Driven” Seasonal Trending »Lead Time Advance for Seasonal Items »Season Shift Capability »Dual Usage for Seasonal with Long Lead Times –Threshold Minimums –Rollup Capability –Usage Forecasting Accuracy Analysis and Correction n Safety Stock Improvements: –Safety Days or Percentage –Safety Control by Rank –Method Control by Lead time –Safety Stock Analysis n Lead Time Improvements: –Minimum and Maximum –History File with Maintenance –History/Parameters by Path (Int/Ext) –Exceptions w/ Automated Ignore –Manual Exceptional Lead Times n Customer Buying Habits, Threshold Minimums and “Automated” Overrides n Use of Hits and “Smart” Item Ranking n “Smart” Parameters and Controls

45.  2005 Grant W. Howard Company 45 n Review/Order Cycle Improvements: –Based on Purchasing History or Extended AMU – Min, Max and Exception –Transfer Cycle Days –OC/RC Analysis n Order Quantity (EOQ) Improvements: –Co, Whse, Pline, Product level –Vendor and Transfer (Path) –Min and Max Supply –Calculate but do not use (SP) n Use of Hits and “Smart” Item Ranking n “Smart” Parameters and Controls Cost Per Unit Ordered EOQ Total Cost “K”eep Cost “R”eoder Cost Quantity Ordered “Best Practices” Better Numbers - Line Point and OQ PNA/Level Surplus Point Line Point or Max/EOQ Order Point or Min EOQ Order Cycle Lead Time Safety

46.  2005 Grant W. Howard Company 46 “Best Practices” - Better Tools n Buyer’s Control Center - BCC –Priority –Targets –“Smart” Rounding –Drill Down/Maintenance –Proper combination of the three models and use of EOQ –“One-stop” Thinking n Time Line Analysis –“Too Late” –“Too Early” n “Smart” Surplus - “True” Surplus n Exception Control Center - ECC –“Smart” exception reporting –Mass Update –“One-stop” thinking n Safety Stock at Receipt Analysis n Measurement and Monitoring n Rounding Control and Smart WT n Three buying methods and WT’s: –LP with or without OQ –WT Cycle and Set weeks supply –Full control and Works together –Proper products, Proper quantities n Improved Stock Levels: –Orders, PO’s and WT’s Control –Future Sales Orders –Future P/O’s –Strong Suggested Count Program –WMS n Flexible Product Merge Utility n Stock Balancing Tools n Use of Hits and “Smart” Item Ranking n “Smart” Parameters and Controls

47.  2005 Grant W. Howard Company 47 Some Final Thoughts

48.  2005 Grant W. Howard Company 48 It’s not just good Software and Systems It’s not just good Processes and Procedures It’s not just good People and Education It’s not just good Management IT’S ALL OF THEM! It’s not just good Usage It’s not just good Order Points It’s not just replenishing at Order Point It’s not just the Timeline It’s not just working the Surplus IT’S THE ENTIRE PROCESS Same Company Different Software

49.  2005 Grant W. Howard Company 49 The Big Picture Longevity Growth Profitability Customers Employees Vendors Service, GM Improvement, Asset Management, Efficiency, Accuracy Replace Inventory and Costs and Improve Service with Technology

50.  2005 Grant W. Howard Company 50 Replace Inventory and Costs and Improve Service with Technology. Improve the Bottom Line with Technology Information, Efficiency, Accuracy (If it is not helping Service, if it is not helping Profits…)

51.  2005 Grant W. Howard Company 51 “Getting Results” - Top 10 Better Numbers: 1. Hits based Ranking - ICSR and ICAI 2. Smart Set-Up and Maintenance - ICSR 3. Usage: Lost Sales and Exceptional Sales, Seasonal Trending, and Roll Up - ICSR, ICSW, OE and WT 4. Customer Buying Habits - ICSR & ICSW 5. RC and EOQ Control and Depth - ICSD, ICSL, ICSW, ICAR Better Tools: 1. Paperfloat Control - BIIS 2. Buyer’s Priority, Targets Properly/Equal Days Supply, and One-Stop - POERA 3. Timeline Analysis “Too Late” and “Too Early” - ICRIG 4. Long Term Surplus - ICRIS 5. Exception Control Center and Mass Update - ICAMU

52.  2005 Grant W. Howard Company 52 “Getting Results” - Top 10 Improved Fill Rates: 1. Accurate Order Point: –Track Lost Business/Usage –Customer Buying Habits 2. Accurate Level 3. “When” - Replenish at OP - BCC 4. Stock Out /Lost Business Prevention -Timeline Analysis/”Too Late” 5. Closed-loop Backorder Process Improved Profitability: 1. Accurate Line Point (OC) and Order Quantity (EOQ/Class): –Track Exceptional Business/Usage –Proper LP/OQ Controls and Use 2. Accurate Level 3. “What & How Much” - Line Point, Order Quantity, Package 4. Surplus Prevention - Timeline Analysis/”Too Early” 5. Inventory Reduction: –Surplus/Excess Reduction –OC/RC/OQ Reduction - Caution –Safety Reduction - Caution

53.  2005 Grant W. Howard Company 53 Spend your days reacting to the fires... you may be efficient, but will you be effective? Where are Your Systems, Procedures, and Objectives S(p)ending Your People?

54.  2005 Grant W. Howard Company 54 Back to Basics Most distributors DON’T: n Set the system up properly n Feed the system good data n Understand or Use the system properly n Clean up bad processes and procedures n Educate their people on the system or processes n Help departments work together n Help work towards common goals Yet they think it will all just magically work

55.  2005 Grant W. Howard Company 55 “Branch Participation” It’s Essential! n Sell n Service the Customer n Controlled Replenishment (PO’s and Transfers) n Good Data and Information (Rifle vs Shotgun) –Lost and Exceptional Sales –On-hand Integrity and Paperfloat Control n Proper Backorder Handling n Surplus Prevention & Disposition –Controlled Replenishment –Help utilize the Surplus n “Smart” Selling and Transferring n Eyes and Ears Train the Masses Teach Them Benefits Give Them the Tools

56.  2005 Grant W. Howard Company 56 REMEMBER! When to Replenish Order Point Service What and How Much to Replenish Line Point and OQ Profitability There is Always a Left and Right Side Balance

57.  2005 Grant W. Howard Company 57 The World is Changing! YesterdayTodayTomorrow Buyers/Inv. ControlInventory/Asset Managers??? Turns DominatedCustomer Service Oriented If you can’t Inaccurate DataData/Information Managers handle today, Four Glass WallsCommunications & Team how will you Learned from “Bill”Education & Understanding handle Pencil and PaperTechnology and Efficiency tomorrow? If your company is stuck in Yesterday or having troubles with Today, how will it survive Tomorrow?

58.  2005 Grant W. Howard Company 58 Keys to “Getting Results” - Top 10 1. Hits/Ranking and “Smart” Parameters 2. Order Point, Line Point and Order Quantity Accuracy: –Usage: »Lost/Exceptional Utilization »Usage Exceptions and Maint »Proper Method and Window »Seasonal Trending & Adv LT »Roll Up »Usage Accuracy Analysis –Lead Time Exceptions and Maint –Safety Set-up and Safety Analysis –Order Point Adjusters –OC/RC Analysis –Proper EOQ Parameters –WT “Smart” Rounding 3. On-hand and Paperfloat Accuracy: –SC/CC Program and Address the Issues, Good Processes –Paperfloat Control –WMS, BC, RF

59.  2005 Grant W. Howard Company 59 4. Buyer’s Control Center: –Priority - Replenish at OP –On-Stop, On-line, Paperless –Making Targets Properly - Keep Equal Days Supply 5. Timeline Analysis: –“GAP”/“Too Late” –“Too Early” 6. Surplus/Excess/Defective: –“Smart” (Long and Short Term) –Visibility, Utilization and Disposition –Incoming with LT Surplus 7. Backorder Policy and Procedure - Closed-loop 8. Exception Control Center: –“ Smart ”/”True” Exceptions –On-Stop Corrections –Mass Update 9. Measurement and Monitoring: –Service (Fill, BO, OTD, Accuracy) –ROI –Mix –Excess –Freight –Vendor Performance Keys to “Getting Results” - Top 10 10. Controlled Replenishment and Stocking Policy

60.  2005 Grant W. Howard Company 60 GWHCO www.gwhco.org Grant Howard: ghoward@gwhco.org 734-428-0529 Phone 734-428-0593 Fax John Cason: jcason@gwhco.org 256-830-0676 Phone 256-830-0481 Fax Our approach involves tailoring the best practices in distribution to the specific needs of our clients. Our working philosophy revolves around building a strong and self- maintaining infrastructure by developing a working plan based on processes and procedures, education and understanding, implementation of tools and technology; and through communication, organizational structure and team environments.