2005 grant w. howard company 1 grant w. howard 13214 wallace road manchester, mi 48158 (734)...
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2005 Grant W. Howard Company 1
Grant W. Howard
13214 Wallace Road
Manchester, MI 48158
(734) 428-0529
Profitability, Longevity and Growth
The Next Level
2005 Grant W. Howard Company 2
Our Discussion Today
The Big Picture The Replenishment Process Getting Results:
– Customer Service:» Path to Success» Getting Results
– Profitability:» Path to Success» Getting Results
The Power of Your System Summary - Some Final Thoughts
Through Slide 33 - “Lite” System and Summary
“Discussion”
Today is different from the last two days… Day 1 - How it Works, Day 2 - How to Use it
Today - Less whiteboard and system, and more how to
make it all come together to GET RESULTS!
2005 Grant W. Howard Company 3
Profitability
Longevity
Growth
Warehouse
Sell
Procure
Customer Service
Vendor Performan
ce
Employee Happiness
Education and
Understanding
Communication,
Structure, and Team
Systems and ToolsProcesses and
Procedures
Owner’s Returns
and Happines
s
The Fundamental Tree
Service, GM Improvement, Asset Manage-
ment, Efficiency, Accuracy
2005 Grant W. Howard Company 4
Profitability, Longevity and GrowthProfitability ($&%): GM Improvement ($&%):
– Sales Increase - Loyalty:» Sell Price x 2» Lost Business and Backorders» More of Customer’s Business» New Business
– COGS Decrease/Supplier Negotiations
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: Customer Loyalty:
– Customer Service:» Fill Rates» Backorder Handling» On-Time Delivery» Accuracy - Product, Price, Quantity,
Terms
– Ability to Solve Customer Issues– Use Technology to ...
Dynamic - its Critical:– Adaptability to Market Changes– Use Technology to ...
Growth: Existing Customers:
– Lost Sales and Backorders– Depth of Customer’s Business
New Customers
2005 Grant W. Howard Company 5
Procure: Inventory
Management/Control Operations Sales Marketing Systems and Technology
Warehouse: Operations Inventory Management/Control Systems and Technology Sales Marketing
Sell: Sales Marketing Inventory Management/Control Operations Systems and Technology
Seems to be a Pattern?
Where does Management fit into all
of this?
Profitability, Longevity and Growth
2005 Grant W. Howard Company 6
Customers: Availability Backorder Handling On-Time Delivery Accuracy
– Product
– Quantity
– Price
– Terms
Win-Win MEASURE
Vendors: Win-Win Not Just Price MEASURE
Employees: Want to do a Good Job Balanced Objectives/Team Tools, Processes, EDUCATE! Remove Stress, Give Method Win-Win MEASURE
Profitability, Longevity and Growth
2005 Grant W. Howard Company 7
Communication, Structure and Team: Companies need to have a team concept, KNOWN balanced objectives, with a way to get there - Management!
Systems and Tools: Companies need to understand and use more than 20, 30, 50% of their systems!
Processes and Procedures: Companies need to have closed-loop, actual working processes and procedures!
Education and Understanding: Companies need to education their people and help them be part of the solution!
Profitability, Longevity and Growth
2005 Grant W. Howard Company 8
Inventory Management
Getting ResultsWhen, What, How Much
2005 Grant W. Howard Company 9
The Replenishment Model
A Good Replenishment Model addresses the two objectives of
Customer Service and Profitability
WhenWhen to Replenish? to Replenish?
What What to Replenish and to Replenish and How muchHow much??
What is incoming and will be late?What is incoming and will be late?
What is incoming and will be early or is not needed?What is incoming and will be early or is not needed?
What is not needed?What is not needed?
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PNA/Level
Surplus Point
Line Point or Max/EOQ
Order Point or Min
EOQ
Order Cycle
Lead Time
Safety
When to Replenish?
What is not
needed?
What to replenish and How Much?
When, What, How Much?
What is not Needed?
The Basics - Make Sure
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“When and What” “When to Replenish”
– Target/Incentive and RC - Profits– BOP with Target/Incentive and RC considerations
- Profits and Service “What to Replenishment”
– Line Buy (Make Target)– Fill In/Emergency Buy– Transfers– Do Nothing
Cost to Carry versus Freight, Price and Service
2005 Grant W. Howard Company 12
“What and How Much”
Line Buy/TransferItems Below LP
Order Quantity:
1. Up to LP
2. Compare to SOQ
3. Minimum Run
4. Vendor/Transfer Package
Fill-in Buy/TransferItems Below OP/“Cycle*”
Order Quantity:
1. Up to OP/”Cycle*”
2. Compare to SOQ?
3. Vendor/Transfer Package
* It is important to replenish items not only below OP, but also the items below the “Cycle”. These items should be replenished at least back up to
the “Cycle”. Cycle is the days left in the cycle (OC - (Today - LLB))
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Data
Usage - OE/WT
Lead Time - OE/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
2005 Grant W. Howard Company 14
Data
Usage - OE/WT
Lead Time - OE/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
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Getting Results!
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Service - Fill Rates? How well a business meets its customer’s needs - pulse
of customer’s happiness/loyalty. What to measure:
Fill Rates = Shipped/Ordered
Quantity: 9 out of 10 = 90%
Line Item SC: 9 out of 10 = 0%
Order Ship Complete?
What should Fill Rates be? The report is broken?
2005 Grant W. Howard Company 17
Profits - Turns? ROI?
Freight, Cost to Carry and Cost to Purchase
Maximize the Bottom Line
C to P Turns
80’s $10.00 2-3
90’s $5.00 3-6
00’s $2-3.00 6-10
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 ManagementP
rofi
tabi
lity
Turns
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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 Reacting.
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Service and Profit - Balance
Hits H H L L
Cost L H L H
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Inventory Management Objectives
Customer Service Availability (Fill Rates)
Proper Backorder Handling On Time DeliveryAccuracy: Item, Quantity, Price
Profitability (ROI)GM Improvement (Sales and Cost)
Freight Considerations - OC AnalysisEfficiency & Asset Mgt: CtoC and CtoPSurplus Inventory & Safety InventoryTurns/Days supply, ROI/T&E/GMROIWatch the C to P
(Purchasing/Replenishment, Receiving &
Put-away, A/P)
Watch the C to C
(Warehousing, Handling, Obsol. &
Shrink, Taxes, Ins, Interest)
2005 Grant W. Howard Company 21
The Path to Success - Service1. Accurate Order Point:
– Usage:» Data Collection, Lost Business, Inputs» Method and Window» Seasonal Trending, Advance by Lead Time,
and Shift» Roll Up» Correct Paths» Usage Forecast Accuracy Analysis
– Lead Time
– Safety:» Safety by Rank/Hits/Velocity» Safety Method by Lead Time» Safety Analysis
– Customer Buying Habits
– Data, Parameters, Forecasting
2. Accurate Level:– On-hand Integrity
– Paperfloat Control
– BIIS
3. Replenish at Order Point:– BOP and Prio
– POERA
4. Monitor Changes/Timeline:– Timeline “Gap”/”Too Late”
– ICRIG
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The Path to Success - Service
5. Closed-loop Backorder Process - Service
6. Keep it Working - Maintenance:– Get out of the “Yellow Sticky World”
– Watch for Suppressed with Activity
– POERA, WTERA, ICAMU
7. Measure and Monitor:– Drill in, Rifle Approach - Don’t Shotgun Approach it, just $$$ and
disappointing results.
– ICAMU, ICRIF
8. Receiving, Put-away and Backorder Handling - Service
9. Picking, Shipping and On-Time Delivery - Service
10. Billing - Product, Quantity, Price, Terms - Service
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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 ServiceAvailability, 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
2005 Grant W. Howard Company 24
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 have to drive your inventory through the roof, it just has to be done smart.
Customer ServiceAvailability, Backorders, OTD, Accuracy
Keys to Good Fill Rates
2005 Grant W. Howard Company 25
Customer ServiceAvailability, Backorders, OTD, Accuracy
Customer Service Improvement: Availability Backorder Handling On-Time Delivery Accuracy - Product,
Quantity, Price, Terms
GM Improvement, Service, Efficiency, Accuracy, Asset Management
2005 Grant W. Howard Company 26
Inventory Management Objectives
Customer Service Availability (Fill Rates)
Proper Backorder Handling On Time DeliveryAccuracy: Item, Quantity, Price
Profitability (ROI)GM Improvement (Sales and Cost)
Freight Considerations - OC AnalysisEfficiency & Asset Mgt: CtoC and CtoPSurplus Inventory & Safety InventoryTurns/Days supply, ROI/T&E/GMROIWatch the C to P
(Purchasing/Replenishment, Receiving &
Put-away, A/P)
Watch the C to C
(Warehousing, Handling, Obsol. &
Shrink, Taxes, Ins, Interest)
2005 Grant W. Howard Company 27
The Path to Success - Profits1. Accurate Line Point and Order Qty:
– Accurate Order Point
– Usage:» Data Collection, Exceptional Business, Inputs» Method and Window» Seasonal Trending, Advance by Lead Time,
and Shift» Roll Up» Correct Paths» Usage Forecast Accuracy Analysis
– Accurate Review/Order/Transfer Cycle
– Proper OQ Parameters and Controls
– Proper Understanding and Use of LP and EOQ
– Data, Parameters, Forecasting
2. Accurate Level:– On-hand Integrity
– Paperfloat Control
– BIIS
3. Replenish the Correct Qty:– Line Point, OQ, Pkg
– Making Targets Properly
– POERA
4. Monitor Changes/Timeline:– Timeline “Too Early”
– ICRIG
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The Path to Success - Profits
5. Surplus Identification and Disposition Process
6. Keep it Working - Maintenance:– Get out of the “Yellow Sticky World”
– Watch for slow/inactive stock items
– POERA, WTERA, ICAMU
7. Measure and Monitor:– Drill in, Rifle Approach - Don’t Shotgun Approach it, just $$$ and
disappointing results.
– ICAMU, ICRIT, ICRIR
8. Receiving, Put-away and Backorder Handling - Efficiency
9. Picking, Shipping and On-Time Delivery - Efficiency
10. Billing - Product, Quantity, Price, Terms - Efficiency
2005 Grant W. Howard Company 29
ProfitabilityGM & 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
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ProfitabilityGM & Expenses (Freight, CtoC, CtoP)
7. Excess and Defective Control:– Prevention
– Disposition
8. Order Quantity Reduction:– OC/RC (LP) Reduction:
» OC/RC Analysis/Paths, 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
2005 Grant W. Howard Company 31
PNA/Level
Surplus Point
Line Point or Max/EOQ
Order Point or Min
EOQ
Order Cycle
Lead Time
Safety
ProfitabilityGM & Expenses (Freight, CtoC, CtoP)
Understand the Impact Areas: Excess and Defective:
– No one wants or needs– Control the Feelings– Let it Roll, Let it Go– Be Careful - C to C/Mix
Line Point and Order Quantity:– “What” and “How Much”– Be Careful - C to P Departments
Order Point - Safety Stock:– “When”– Be Careful - Customer Service
2005 Grant W. Howard Company 32
Vendor Performance and Negotiations - It’s not just Price
Lower COGS Lower Freight Minimums Multiple Drops for Freight Combined P/O’s for Minimum Freight Paid Fill-ins
Fill Rates Consistent Lead Times and OTD Accurate Shipping (Blanket
Receiving) - Product, Quantity, Price
Good Backorder Handling
EDI/VMI/2-Way Information Flow - B2B
Automated Product and Pricing Updates
RGA’s on New Items Excess Inventory Returns
Win/Win - Partnership
2005 Grant W. Howard Company 33
ProfitabilityGM & Expenses (Freight, CtoC, CtoP)
Profitability Improvement: GM Improvement Expense Reduction:
– Freight
– Cost to Carry
– Cost to Purchase
GM Improvement, Service, Efficiency, Accuracy, Asset Management
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How Much of the System Are You Using?
Good System - Over 80% of Items Listed
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“Best Practices” Inventory ManagementImprove Customer Service, GM, Asset Management, Efficiency, and
Accuracy Better SKU Coverage - System and Buyers
– 60 - 80% SKU Coverage to 85-96%– 5-25,000 SKU/Buyer to 40,000-100,000+
Improved Time Management Improved Priority Setting Improved Efficiency Improved Accuracy Technology and Core Replace Inventory with Information Rifle Approach Better Numbers and Better Tools Ability to Balance Profits and Service
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“Smart” Parameters
Product Record
Product Line Record
Vendor Record
Warehouse Record
Company Record
Table Driven/Automated
Depth
Watch Hardcoding
Balanced
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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 C C to PCos
t Per
Uni
t Ord
ered
EOQ
Total Cost
Cost to Carry
(“K”eep Cost)
Cost to Purchase
(“R”eoder Cost )
Quantity Ordered1. Not less than “x” weeks supply (1 week)2. Not more than “x” weeks supply (1 year)
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Paperfloat Control
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Buyer’s Control Center/Workbench
On-line, Priorities, One-Stop, Drill Down, Maintenance,
Targets
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Making Targets ProperlyGeneral rules of thumb: Days Dollars 1/2 way through OC/RC
Cost to Carry vs Freight, Price, and Service:
Key is equal days supply Increase or Decrease Use for Proper Emergency
Buys/Fill-ins
LinePoint
OrderPoint
Out ofStock
SafetyStock
xx
x
x
x
xx
x
x
x
x = Products in Product Line
New line pointafter adjustingreview cycle days
xx
xx
2005 Grant W. Howard Company 41
$Dis
coun
t/In
crea
se$C
to C
$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.
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Time Line Analysis
In Out
7-30 days
Ideal
Timeline
Out In
0 + days
Too Late
Timeline
In Out
30 + days
Too Early
Timeline
Identification and Prevention are the KeyDoesn’t matter if late if didn’t need
Doesn’t matter if on time if needed earlier
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Surplus Inventory
Responsibility Coordination
Prevention
Identification
Disposition
Goals/Plan
CONTINUOUS
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“Smart” MonitoringSafety Stock - Service and Turns
Safety Stock Level
X
X
XX
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 receivingthe replenishment PO. Impossible task if done manually.
75%
25%
50%
Enhancement automates the monitoring.
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“Best Practices”Better Numbers - Order Point
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
– 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
Safety Stock Improvements:– Safety Days or Percentage– Safety Control by Rank– Method Control by Lead time– Safety Stock Analysis
Lead Time Improvements:– Minimum and Maximum– History File with Maintenance– History/Parameters by Path (Int/Ext)– Exceptions w/ Automated Ignore– Manual Exceptional Lead Times
Customer Buying Habits, Threshold Minimums and “Automated” Overrides
Use of Hits and “Smart” Item Ranking “Smart” Parameters and Controls
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Review/Order Cycle Improvements:– Based on Purchasing History or Extended
AMU– Min, Max and Exception– Transfer Cycle Days– OC/RC Analysis
Order Quantity (EOQ) Improvements:– Co, Whse, Pline, Product level
– Vendor vs Transfer (Path)– Min and Max Supply– Calculate but do not use (SP)
Use of Hits and “Smart” Item Ranking “Smart” Parameters and Controls
Cos
t Per
Uni
t Ord
ered
EOQ
Total Cost
“K”eep Cost
“R”eoder Cost
Quantity Ordered
“Best Practices”Better Numbers - Line Point and OQ
2005 Grant W. Howard Company 47
“Best Practices” - Better Tools 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
Time Line Analysis– “Too Late”– “Too Early”
“Smart” Surplus - “True” Surplus Exception Control Center - ECC
– “Smart” exception reporting– Mass Update– “One-stop” thinking
Safety Stock at Receipt Analysis Measurement and Monitoring
Rounding Control and Smart WT 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 Improved Stock Levels:
– Orders, PO’s and WT’s Control
– Future Sales Orders
– Future P/O’s
– Strong Suggested Count Program
– WMS Flexible Product Merge Utility Stock Balancing Tools
Use of Hits and “Smart” Item Ranking “Smart” Parameters and Controls
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Some Final Thoughts
2005 Grant W. Howard Company 49
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
2005 Grant W. Howard Company 50
Use measurement and monitoring reports to confirm results and to
drill down and find areas of improvement.
Be sure to use a rifle approach rather than a shotgun approach,
or it will be lots of $$$ and probably disappointing!
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Measure ResultsCustomer Service:
Fill Rates/Availability (ICRIF)
Accuracy - Product, Quantity, Price (CM%)
On-Time-Delivery
Backorder Handling (ICRIN)
Profits and ROI:Surplus - Disposition (ICRIS)
and Prevention
Safety Analysis (ICAMU)
Review/Order Cycle:Freight Dollars - As percentage
of sales
Turns - Really C to C and C to P (ICRIT)
Turn and Earn - ROI (ICRIR)
Replace Inventory with Information
Do better on both sides!
2005 Grant W. Howard Company 52
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…)
2005 Grant W. Howard Company 53
Keys to “Getting Results” - Top 101. 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
2005 Grant W. Howard Company 54
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
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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?
2005 Grant W. Howard Company 56
Back to BasicsMost distributors DON’T: Set the system up properly Feed the system good data Understand or Use the system properly Clean up bad processes and procedures Educate their people on the system or processes Help departments work together Help work towards common goals
Yet they think it will all just magically work
2005 Grant W. Howard Company 57
“Branch Participation”It’s Essential! Sell
Service the Customer Controlled Replenishment (PO’s and Transfers) Good Data and Information (Rifle vs Shotgun)
– Lost and Exceptional Sales
– On-hand Integrity and Paperfloat Control Proper Backorder Handling Surplus Prevention & Disposition
– Controlled Replenishment
– Help utilize the Surplus “Smart” Selling and Transferring Eyes and Ears
Train the MassesTeach Them Benefits
Give Them the Tools
2005 Grant W. Howard Company 58
The Big PictureLon
gevi
ty Grow
th
Profitability
Customers
Employees
Vendors
Service, GM Improvement, Asset Management, Efficiency, Accuracy
Replace Inventory and Costs and Improve Service with Technology
2005 Grant W. Howard Company 59
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
2005 Grant W. Howard Company 60
Things to Think AboutService: Fill Rates - Having the RIGHT Inventory:
– Shotgun - $$$, Poor Results and not Balanced
– Rifle - Smart $$$, Great Results and Balance
– Replace Inventory with Information Understanding “When” Controls Service -
NO GAMES, REPLENISH at Order Point
The Importance of Order Point Adjusters The Importance of Controlled
Replenishment Buying a 90 day supply and it lasts 60
days
Profits: Turns Maximization is not Profits Maximization - The
Right Way to Turns:– Excess/Defective: 5%– Safety Stock: 15-20%– Review/Order Cycle and Order Quantity Reduction -
Caution (BCC, ECC, EDI/VMI, WMS, BC, RF, Blanket Receiving- Internal and External, EDI Invoice/Trans$, Automated Pricing, Maintenance and Updating)
Understanding “What and How Much” Controls Profits - NO GAMES - Order what the system recommends. Watch topping the truck, pre-buys, discounts/price increases
The Importance of “Equal Days Supply” The Importance of Controlled Replenishment Buying a 90 day supply and it lasts 120 days
2005 Grant W. Howard Company 61
The Things I Hear... We know it’s at OP, but... LP and EOQ are just suggestions, they don’t really mean any thing... It doesn’t matter how you get to the minimum, the important thing is
getting the P/O placed and not paying freight... It doesn’t matter if anything is BOP, we can place a P/O every day... We keep upping the RC, but it hardly changes the P/O... Items keep going BOP or GAP sooner than they should, stupid
computer... The quantities are always wrong on the RARRs, really stupid
computer... Stocking policy, backorder policy, what policy… Increasing turns is easy, we just buy less or don’t buy at all…
2005 Grant W. Howard Company 62
The Things I Hear... We understand service - everyone can buy and transfer inventory and
they do... We measure things, our turns are 4.2394702... We’re wondering how the computer invested so much in inventory
and we got so little... We don’t have time to prevent fires, we are running around all day
putting them out... Usage is correct by special magic; lost sales and exceptional sales
logging are just a waste of time, talk to customers... We have to have more people, look at all these THICK reports we look
through. We even find something sometimes… We review our lines at least monthly, many weekly... We understand the process and maintenance; as long as we push the
right buttons… (10 steps)
2005 Grant W. Howard Company 63
The World is Changing!
Yesterday Today TomorrowBuyers/Inv. Control Inventory/Asset Managers ???
Turns Dominated Customer Service Oriented If you can’t
Inaccurate Data Data/Information Managers handle today,
Four Glass Walls Communications & Team how will you
Learned from “Bill” Education & Understanding handle
Pencil and Paper Technology and Efficiency tomorrow?
If your company is stuck in Yesterday or having troubles with Today, how will it survive Tomorrow?
2005 Grant W. Howard Company 64
GWHCO
www.gwhco.org
Grant Howard:[email protected]
734-428-0529 Phone
734-428-0593 Fax
John Cason:[email protected]
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.