1. INVETORY MANAGEMENT Presented By: Leydi Velez Ahmed Al Shaeef Herbert Guerrero John Herrera EIN 5346 Logistics Engineering Chapter 9

2. Agenda I. Contemporary Approaches to Managing Inventory 1.Inventory Management Software 2.Vendor-Managed Inventory (VMI) 3.Just-in-Time (JIT) 4.JIT Case Study

3. Inventory Management Software

4. Benefits:  Eliminate manual inventory management processes thereby reducing errors and lead time.  Provides managers easy access to the numbers that are needed for reporting and restocking information.  Provides complete real-time visibility into demand, supply, costs and fulfillment measures and trends.  Significantly improve your relationships with suppliers, vendors and partners by providing self service and real- time visibility.

5.  Improve demand planning/reduce forecast error rate  Reduce lost sales and backorders  Increase inventory turnover  Manage large numbers of styles and SKUs efficiently and accurately  Improve management understanding of forecasting and inventory management process and performance  Increase sales and profits Benefits Continued: Inventory Management Software

6. inFlow 1.Sales – Sales Orders and Customer Information 2.Purchasing – Purchase Orders and Vendor Information 3.Inventory – Product Information, Stock Quantities, Stock Adjustments, etc. 4.Reports – Reports offered by inFlow to gather and share information Inventory software for small to mid-sized businesses. divided up into four main modules: http://www.inflowinventory.com/ Download options: Free Edition, Regular Edition ($299/license), Premium Edition ($499/license)

7. Software development company providing Inventory Control Software for 3PL Public Warehouses, Manufacturers, and Distributors. Inventory Control Tracker TM 1.Inventory records are updated automatically 2.Notifications (reaching expiration date) 3.Multiple warehouse tracking 4.Track items by item #, lot #, production code, date, carrier, consignee. Traker Systems http://www.trakersystems.com Editions: 3PL Public Warehousing Edition, Manufacturing & Distribution Edition, Lite Edition Inventory Management Software

8. FishBowl Inventory Inventory Management system for small to medium-sized companies that integrates with Quickbooks. Features: 1.Multi-location inventory tracking 2.Manufacturing 3.Part Tracking 4.Unit of measure 5.Drop shipping 6.Bar coding 7.Credit card processing 8.Variable pricing and discounting 9.Order picking 10.Kitting www.fishbowlinventory.com Inventory Management Software

9. AdvanceWare Technologies, AdvancePro Inventory AdvanceWare Technologies, AdvancePro Inventoryhttp://www.advanceware.net NetSuite NetSuite http://www.netsuite.com/portal/products/netsuite/supply- inventory/main.shtml Direct Tech, Inc. Forecast*21 (Inventory forecasting) Direct Tech, Inc. Forecast*21 (Inventory forecasting)http://www.direct-tech.com Inventory Management Software

10. Inventory Optimization Software Mincom Critical Inventory Optimization (MCIO) is an intelligent, predictive software solution that identifies the optimal holdings of every stock item based on usage patterns and criticality. MCIO automatically analyzes and adjusts stock levels and reordering requirements on an ongoing basis. Mincom Critical Inventory Optimization (MCIO) is an intelligent, predictive software solution that identifies the optimal holdings of every stock item based on usage patterns and criticality. MCIO automatically analyzes and adjusts stock levels and reordering requirements on an ongoing basis. SmartOps Enterprise Inventory Optimization (EIO) is a comprehensive suite of software modules that enables organizations to plan and manage inventories across global supply chains. SmartOps EIO encapsulates sophisticated, proprietary algorithms into software that integrates with enterprise planning systems and handles large-scale, complex supply chains in a dynamic and automated manner. SmartOps Enterprise Inventory Optimization (EIO) is a comprehensive suite of software modules that enables organizations to plan and manage inventories across global supply chains. SmartOps EIO encapsulates sophisticated, proprietary algorithms into software that integrates with enterprise planning systems and handles large-scale, complex supply chains in a dynamic and automated manner.

11. JDA’s Network & Inventory Optimization uses deterministic and stochastic optimization combined with flexible user-interface and analytical workbenches JDA’s Network & Inventory Optimization uses deterministic and stochastic optimization combined with flexible user-interface and analytical workbenches Smartcorp uses proven forecasting solutions that accurately predict, for each product item, the most likely or expected value for demand over a given lead time. The safety stock recommendations and stocking level estimates that are generated are immediately available for use in other parts of your corporate planning system Smartcorp uses proven forecasting solutions that accurately predict, for each product item, the most likely or expected value for demand over a given lead time. The safety stock recommendations and stocking level estimates that are generated are immediately available for use in other parts of your corporate planning system Inventory Optimization Software

12. Vendor-Managed Inventory

13. Challenge Due to increased global complexity, companies are experiencing long lead times and high demand volatility. This has resulted in an increased emphasis on managing inventory. Identifying the best practices and the best tools to accomplish this has become critical

14. Vendor Managed Inventory VMI is the process where the supplier generates orders based on mutually agreed objectives and demand information sent by the customer.

15. Main Activities 1.Supplier/Vendor has access to customer’s inventory data 2.Supplier/Vendor is responsible for maintaining the inventory level required by the customer 3.Supplier/Vendor replenishes inventory via scheduled reviews

16. Benefits Customer Automate Replenishment process Automate Replenishment process Reduced inventory Reduced inventory Reduced operating costs Reduced operating costs Focus on core process Focus on core process Intangibles Intangibles Shorter cycle time Greater customer satisfaction Avoid stock-outs Avoid stock-outs Supplier Increased volume Increased volume Forces disciplines Forces disciplines Measurements Communication Better planning and resource use Visibility via information sharing Need to eliminate or reduce non-value-added activities Need to eliminate or reduce non-value-added activities Reduce safety-stock Reduce safety-stock

17. How to make it work Clarify expectations Clarify expectations How the system will benefit both organizations in the long termHow the system will benefit both organizations in the long term Agree on how to share information Agree on how to share information Enough information to maintain a steady flow of goods is necessaryEnough information to maintain a steady flow of goods is necessary Keep communication channels open Keep communication channels open Misunderstandings need to be studied as opportunities for learning and then used to avoid repetitive problems in the futureMisunderstandings need to be studied as opportunities for learning and then used to avoid repetitive problems in the future

18. VMI Flow

19. Performance Measurements How to ensure VMI will enhance the business? Establish measures – identify the goalEstablish measures – identify the goal Starting number of items vs. expected goal Starting number of items vs. expected goal Inventory $ initially vs. expected goal Inventory $ initially vs. expected goal Total inventory $ at start, during, and after Total inventory $ at start, during, and after

20. Measurements Operational improvements Internal The number of stock outs and duration Cost of material/service before and after External Customer satisfaction Improvement of delivery availability Other points as defined by the parties Competitive advantage considerations

21. Just-In-Time (JIT)

22. JUST-IN-TIME (JIT) JIT is originated in Japan as part of the Toyota Production System in the approach to a Lean Production System. JIT is a strategy that strives to improve a business’s return on investment by reducing in-process inventory and associated carrying cost.

23. JUST-IN-TIME JIT means making only “what is needed, when it is needed, and in the amount needed.” JIT means making only “what is needed, when it is needed, and in the amount needed.” JIT supplies “what is needed, when it is needed, and in the amount needed” according to the production plan to eliminate waste, inconsistencies, and unreasonable requirements, resulting in improved productivity JIT supplies “what is needed, when it is needed, and in the amount needed” according to the production plan to eliminate waste, inconsistencies, and unreasonable requirements, resulting in improved productivity JIT removes inventory to expose production flaws that can be corrected or removed in order to improve production quality and increase efficiency and effectiveness. JIT removes inventory to expose production flaws that can be corrected or removed in order to improve production quality and increase efficiency and effectiveness.

24. PROGRESSION TO JIT

25. JUST-IN-TIME EFFECTS Increase factory response time. Increase factory response time. Improve customer satisfaction. Improve customer satisfaction. Build of make-to-order models to eliminate the risk of no being sold. Build of make-to-order models to eliminate the risk of no being sold. Standardization of parts assemblers increasing product quality. Standardization of parts assemblers increasing product quality. Reduce setup time allowing the company to reduce or eliminate inventory for “change-over” time. Reduce setup time allowing the company to reduce or eliminate inventory for “change-over” time. The flow of goods from warehouse to shelves improves by reducing lot sizes to simplify inventory flow and inventory management. The flow of goods from warehouse to shelves improves by reducing lot sizes to simplify inventory flow and inventory management.

26. JUST-IN-TIME BENEFITS Employees with multiple skills are used more efficiently by having the flexibility to move employees where they are needed. Employees with multiple skills are used more efficiently by having the flexibility to move employees where they are needed. Production schedule and work hour consistency is synchronized with demand by avoiding paying overtime or focus resources to other areas. Production schedule and work hour consistency is synchronized with demand by avoiding paying overtime or focus resources to other areas. Increase emphasis on supplier relationship. Increase emphasis on supplier relationship. Supplies comes in at regular intervals through the production day by synchronizing the supply with the demand. Supplies comes in at regular intervals through the production day by synchronizing the supply with the demand.

27. JUST-IN-TIME LIMITATIONS Preconditions to JIT Trust must be present between labor/management as well as suppliers/consumers Recognition of processes Familiarity with problem solving Quality at the source Agreement over value and waste Right Settings Applicable in growth to maturity phases of Product Life Cycle Standard Product Standard/Fixed Pay-Rate Problems with Piece-Rate Scheme JIT operations may leave suppliers and consumers open to supply shocks and large supply or demand changes.

28. JIT Case Study Stopping Stock Outs with Anixter’s Just-in-Time Supply Source: http://www.anixter.com

29. Case study: Anixter Anixter is a leading global supplier of communications and security products, electrical and electronic wire and cable, fasteners and other small components. Anixter is a leading global supplier of communications and security products, electrical and electronic wire and cable, fasteners and other small components. They provide innovative supply chain management services to reduce customers' total cost of production and implementation They provide innovative supply chain management services to reduce customers' total cost of production and implementation For more than five years, Anixter has developed a relationship with a major manufacturer of medical equipment. For more than five years, Anixter has developed a relationship with a major manufacturer of medical equipment. Anixter supplies this manufacturer with a variety of fasteners directly delivered to its production facility. The fasteners are used to build medical equipment from lighting and cabinets t electro cardiogram testers and examination tables Anixter supplies this manufacturer with a variety of fasteners directly delivered to its production facility. The fasteners are used to build medical equipment from lighting and cabinets t electro cardiogram testers and examination tables

30. Case study: Anixter Before Anixter started working with the company, a normal turnaround on the delivery of parts would take a week. Before Anixter started working with the company, a normal turnaround on the delivery of parts would take a week. This slow turnaround increasingly led to delivery delays and out-of-stock situations to cover for the delays and stock-outs. On-site inventory levels were also increased to cover potential shortages. This slow turnaround increasingly led to delivery delays and out-of-stock situations to cover for the delays and stock-outs. On-site inventory levels were also increased to cover potential shortages.

31. Challenge Minimize turnaround on delivered parts. Minimize turnaround on delivered parts.Solution Anixter applied Just-In-Time supply chain with the objective of keeping the required amount of products on the manufacturing floor. Anixter applied Just-In-Time supply chain with the objective of keeping the required amount of products on the manufacturing floor. Case study: Anixter

32. Two manufacturing facilities located in close to each other. Two manufacturing facilities located in close to each other. More than 2,000 bins placed in seven More than 2,000 bins placed in seven stocking locations spread across the two facilities. The company placed between 300 to 800 line orders a week. Providing between 900 and 1,000 part numbers. The company placed between 300 to 800 line orders a week. Providing between 900 and 1,000 part numbers. Each of the stocking locations needed to meet a specified min/max range to meet production goals without overstocking material. Each of the stocking locations needed to meet a specified min/max range to meet production goals without overstocking material.

33. Case study: Anixter Anixter implemented a Just-in-Time program that shifted the inventory to Anixter’s distribution center to allow for a controlled and planned release of material to the production facilities. Anixter implemented a Just-in-Time program that shifted the inventory to Anixter’s distribution center to allow for a controlled and planned release of material to the production facilities. Anixter established a schedule that allowed the Anixter employee to scan the bin levels on a weekly basis. Anixter established a schedule that allowed the Anixter employee to scan the bin levels on a weekly basis. During the course of the first year, Anixter worked with the customer to create usage forecasts. During the course of the first year, Anixter worked with the customer to create usage forecasts.

34. Solution Anixter generated weekly usage reports, which created minimum and maximum quantity ranges on the used products without risking stock-outs or over-delivery. Anixter generated weekly usage reports, which created minimum and maximum quantity ranges on the used products without risking stock-outs or over-delivery. Based on two- to eight-week requirements, Anixter successfully worked with the customer to reduce the amount of on-hand materials and create an efficient just-in-time solution that kept the required amount of products on the manufacturing floor. Based on two- to eight-week requirements, Anixter successfully worked with the customer to reduce the amount of on-hand materials and create an efficient just-in-time solution that kept the required amount of products on the manufacturing floor.

35. Program Results Forecasting allowed the manufacturer to gain greater control over its inventory and set expectations of the levels of materials that would be kept on the production line and in its storerooms. Forecasting allowed the manufacturer to gain greater control over its inventory and set expectations of the levels of materials that would be kept on the production line and in its storerooms. Instead of everything going through separate steps from a buy to expediter to receiver to quality control to builder, everything is handled by Anixter. Instead of everything going through separate steps from a buy to expediter to receiver to quality control to builder, everything is handled by Anixter. The manufacturer only had to focus on the building of its products. The manufacturer only had to focus on the building of its products. The company has set a goal of doubling its profits in five years. The company has set a goal of doubling its profits in five years. Reducing its supplier base by half. Reducing its supplier base by half. Because of Anixter’s just-in-time program, the supply chain has built-in flexibility to meet shifting demands. Because of Anixter’s just-in-time program, the supply chain has built-in flexibility to meet shifting demands.

36. Benefits Obtained Reduced capital investment in components and associated costs Reduced capital investment in components and associated costs Increased facility space Increased facility space Increased efficiency Increased efficiency Improved single point of control for all material receipt Improved single point of control for all material receipt Eliminated production line shortages and delays Eliminated production line shortages and delays

37. Questions ?