1. Best Practice in Inventory Management Chapter 5
Management and Control
Dr Tony Wild

2. Figure 5.1 A & B Evolution of Supply Chain Operations
Operations Director
Inventory Control
Purchasing
Stores
Director
Purchasing
Stores Stock Control

3. Figure 5.1 C & D Evolution of Supply Chain Operations
Materials Director
Inventory Control
Purchasing
Stores C
Customer Service
Distribution
Warehousing
Supply Chain Operations Director
Inventory Management
Supply & Contracts
Customer Service D

4. Figure 5.2 A Management Controls
Operational Objectives
Key Performance Indicator
Measurement technique for Result
Customer
Availability or Delivery on Time
% Achieved, Arrears
Customer Delight
Survey, Queries, Complaints
Inventory Level
Total Stock Value
Stock cover, Gross value
Value of Arrears
Value past due,
Operating Costs
Warehousing Costs
Actual vs Budget
Distribution Costs
Supply & Sales Actual vs Budget
Improvements
Projects Undertaken
Number & Value Started new & Ongoing
Profitability contribution
Benefits identified (Availability or Costs)
Obsolescence
Value of stock written off
Provisions, Value disposed of

5. Figure 5.2 B Management Controls
Necessary Objectives
Performance Measurements
Develop staff
Training days, Budget, Outcomes
Providing correct and effective information
Investigation, Queries, Complaints
Meet Health & Safety requirements
Accreditation, Incident records
Meeting Industry Standards and Legislation
Accreditation, Awards, Non-Conformances
Surpass environmental and social requirements
Accreditation, Awards, Surveys

6. Figure 5.3 Planning Inventory Value
Set the targets then monitor against them

7. Figure 5.4 Controlling Total Spend
Expected issues value
Expected issues value
Unallocated Spend
Emergency orders expected
Stock reduction
Delivery of Items already Ordered
Scheduled receipts
Supplier receipts
Week/month ahead

8. Figure 5.6 a Customer Service KPI Records
Availability
This week/month
Last week/month
Target
Availability (%)
Date
Overdue
More than
x days
Over
due
Backlog

9. Figure 5.6b KPI Records for Inventory Control
This week/month
Last week/month
Target
Inventory
Value
Slow
Movers
Weeks On
Hand
Mover

10. Figure 5.6c KPI Records for Purchasing
Activity
This week/
month
Last week/
Target
Value
% Success
Orders placed
Goods received
Late deliveries
Emergency orders
No of orders
Qty

11. Figure 5.7 Standard Cost & Variances

12. Figure 5.8 Alternative methods of determining unit stock value
Transaction
Figure Alternative methods of determining unit stock value Dt wk
Stck Qty
Cost of next Item to be Issued
Type
Qty
Unit Cost
FIFO (a)
LIFO (b)
Stda
Cost (d)
Av £
(e)
Bal (c)
*Stock Check 10 20 10 20 20 24 20 20 1
demand 3 7 20 20 24 20 20
Order 1 10 26 26 3
demand 2 5 20 20 24 20 26
Receipt 10 26 15 20 26 24 24 26 4
demand 4 11 20 26 24 24 26 5
demand 1 10 20 26 24 24
Order 2 10 28 28 6
demand 6 4 26 26 24 24 28 7
demand 3 1 26 26 24 24 28
Receipt 10 28 11 26 28 24
27.6 28 9
demand 4 7 26 28 24 28
Order 3 10 24 10
demand 2 5 28 28 24
27.6 24

13. Key Points Identify the responsibility for stock management
Set quantitative KPIs and improve continuously
Value all inventory
Foster professionalism
Design systems and information for the user