Agenda

• Current events

• Housekeeping

•Projects

•Warehousing

•Materials handling

What is the role of inventory

• Who is the customer?

• What are your company strategies?

• What are your company goals?

How does this change as you move along the chain?

Why do we have inventories?• Customers’ unreliable forecasts

• Our unreliable forecast

• Poor planning

• Poor inventory control

• Poor internal quality

• Unreliable suppliers and transportation

• Excessive supplier lead times, and poor quality

• Poor or unexpected maintenance

• Transportation opportunity

How might these impact your logistical system?

Inventory

Lower Inventory with High Customer service

Inventory Demand

Inventory Supply

Which Link??

What is your strategic objective in holding inventory

• To facilitate economies of scale

• To aid in smoothing S & D

• To provide protection from uncertain demand

• To secure raw materials

• To hide problems created in other areas

Benefits vs. Cost

Cost of

holding

Cost of

not holding

Are you better off holding inventory or dealing directly with the root cause of the problem you are holding the inventory against?

Why are you holding the inventory?

Can you be successful?

Factors that influence inventory decisions

• Value• Demand & Supply Pattern• Availability• Product type• Criticality• Space• Cost• Transportation, in and out

Types of inventory

• Normal – certain times

• Safety Stock – uncertain times JIC

• In-transit

• Speculative

• Seasonal

• Dead

Inventory management objectives

• What to order?

• How much to order each time?

• How frequently to order?

• How does it serve the customer?

You need a management philosophy that’s strikes a balance between cost and customer service

Who is your customer??????

Inventory Visibility,Know what you have and where it is!!!

Where along the chain do you hold it?

What you need to keep it visible

• Tracking and tracing• Summary and detailed reports• Notification of failure and potential interruptions• Communication

You need good data from all links!!

Where and how do you get it?

Benefits to keeping inventory visible• Increase customer service

• Decrease cost of sales

• Improve relations

• Ability to be proactive

• Improve performance of your Supply Chain partners

• Improve your bottom line

Create an advantage

In order to properly meet your objectives you must know the

cost!

Carrying costOrdering costStock-out cost

Transportation cost

As in any part of your business, you must know the cost of your inventory decisions!

Inventory Carrying Costs

• Cost of Capital– Lost Opportunity Cost– Borrowing Costs

• Inventory Labor– Wages – Fringe Benefits

• Capital Investments– Building– Material Handling Equipment– Types of Storage

Inventory Carrying Costs

• Variable Costs– Heat and Light– Insurance– Shrinkage and Obsolescence

• Tracking Costs– Computer Time & Data Entry

Signs of Trouble

• Loss of customers• Increasing number of back-orders• Stable number of back-orders with a

growing investment in inventory• Periodic lack of storage space• Deteriorating relationships with channel

members

How do you recognize them?

What can you do to fix it?

• Gain commitment from the top• Improve the information system• Examine other logistical activities• Work on improving your forecasting• Rank your inventory in some manner• Incorporate useful tools—MRP,DRP,JIC

and JIT– remember these are only tools

Remember the total cost view of the system!

Packaging or Packaging?What is your objective in packaging?

Type of product

What is the role of packaging for your product?

To Protect

To Facilitate Handling

Customer Service

Security

What is it for your project?

Packaging Trade-offs

Cost vs. Level of protectionPackaging vs. Transportation cost

Cost vs. Level of security

Mode Choice

From which point of view?At what point in the chain?

Packaging and Global Logistics• Varied conditions

– Handling, environment• Country specific packaging

– Industrial, consumer, regulatory• Degree of stability

– Safety• Degree of intermodality

– Ease of transit

• Security• Information

Which degree of packaging?

Packaging Pitfalls,

What are yours?

WarehousingAn integral function in the world of Global Logistics

Distribution

Sourcing

Processing

Reverse logistics

Warehousing

• Functions of Warehouses—Where in the chain?– Receiving and sorting– Storage– Consolidation– Product Mixing– Cross Dock Sorting– Order Processing– Postponement

What is the role of Warehousing?• How does this function fit into your

business model?• What does it do for you in your global

logistics activities?• What are the trade-offs?• Not a place to hide your problems!

Can it provide you with a sustainable competitive advantage???

How does it fit the system?

Warehouse Issues

• Transportation fit• Demand Level• Demand Stability, Seasonality• Need for Control• Numbers, Locations• Layout• Stocking Plans• Automation and Material Handling• Security• Standardization

It’s all about the movement!What is the function of your

warehouse(s)?

Gathering

Breakdown

Multifunctional

Principles of Warehouse Layout

• One Story Design• Move Goods in Straight Line• Efficient Material Handling Equip.• Efficient Storage Plan

– Fast Movers Up Front– Complementary Products Together– Minimize Mispicks

• Minimize Aisle Space– NEVER Dead End Aisles

• Use Full Cube of Building

Advantages and Disadvantages of Centralization

From a logistical perspective

Thoughts to remember

Do not forget the systems approach! If you tweak one part of the equation it will have an affect

on the others.

Thoughts cont.

Changes often require the cooperation of channel partners

The influence of country specificity

Where to locate your Warehouse?

Where to locate your Warehouse?

• What are the needs of your customers?• What are your needs and the role of this facility?• What cost are involved and what are your

limitations? Look to the future!

To centralize or not to centralize? That is the question!

What do you do when one of your largest customers asks you to invest in their new warehouse facility?

Site selectionHow many and what size to have?

Where should they be located?

How do they best fit the system?

Allocation of customer demand and vendor output

What impact will these site have on entire system?

Infrastructure/labor/environment/local trends/customers/etc.

Impact of warehouse location

• Inventory– Safety stock– Lead times and variance!!!!!

• Customer service– Order cycle times– Product availability– Variability of demand

Who owns and operates your Warehouse?

Management must decide what resources they have to work with and the best way to allocate them

Cost/benefit

of

Private vs. Public vs. Contract

Trade-offs

Transportation

Lead times

Stockouts

Production

Trade-offs

Customer Service

Design

Control

Commitment

Initial investment

Flexibility

Country specific

Shared information

Local knowledge

Extras

Operational cost

Exit strategy

Definition of cost

Education

Carrier relations

What is your strategy?

Is this function outsourced or performed in-house?

Cost/control/additional services/duration

Look to the future, what are the trends?

Global warehousing issues

• Who has the power?

• What trade-offs will be made?

• One approach or multiple?

Size–level of security—climate control—transport access—ownership—labor—location—number—areas of responsibility

Facility designEfficient movement of goods

Inventory efficiencies and storage cost

Degree of customer service

Degree of redundancy

Manual or automated systems

Degree of current and future constraints, an eye to the future

Safety

Movement of goods

• Straight line movement

• Match with transportation options

To what degree do we automate?

Manual Warehouse

• Work best with demand extremes• Very flexible system—Humans

?Wages/inaccurate placement/record keeping/damage/wrong pick/other human resource issues

Automated Warehouses

Company or industry specific

Degree of standardization

Country specific issues

Degree of stability

Automation systems

Lift trucks

AS/RS

Horizontal movement

Loading/unloading

Sorting/screening

Item picking

Stationary robots

Robot vehicles

Activities automatedHorizontal movementStorage and retrieval

Scanning and updatingItem picking

Warehouse transportationCargo handling

PalletizingDe-palletizingInspections

Manual vs. Automated

• Cost• Retraining• Equipment reliability• Software• Systems integration• System flexibility

Overall system vs. country specific items

Helping you decideCharacteristics of goods handled

Desired through-put rates

Building shape and size

Labor availability

Cost

Ability to upgrade/redundancy

What is the right mix?

Benefits of automation

• Product handling• Information management• Tracking• Inventory management

“Meet the needs of the customer while supporting the process”

Trends in automation

• Reliability

• Integration

• Flexibility

• Upgradeability

• Maintainability

• RFID