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7  Inventory  Strategies  Towards  Be4er  Profits  

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Who  are  we?  

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Southeast Computer Solutions, a software consulting firm, that has been helping small to medium sized businesses implement warehouse management solutions since 1985. What  do  we  do?  

Southeast Computer Solutions offers its clients expert technology consulting advice based on best practices. We listen to you and provide our best thinking solutions to meet your needs. We help clients by performing business analysis & offering our expert consulting advice specializing in Industrial engineering and helping clients design warehouses for maximum efficiency.

Our  office  located  in  Miami  Lakes,  FL  

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What  our  clients  want  to  know…    

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•  What  items  to  stock?    How  many?    When  to  order  more?  

•  How  do  I  track  in-­‐transit  inventory  and  related  landed  costs?  

•  How  do  I  maximize  space?  

•  How  do  I  store  products  to  maximize  efficiency  (and  minimize  the  cost  of  filling  orders)?  

•  How  do  I  maintain  accurate  on-­‐hand  quanEEes?  

•  How  do  I  track  and  find  my  inventory?    

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7  Inventory  strategies  towards  be4er  profits  

•   Best  pracOces  and  tools  

1.  ForecasEng  

• Tracking  the  supply  chain  

2.  Container  Tracking  

• “They  promised  my  ERP  system  would  handle  costs,  but  it  doesn’t?    Why  does  it  work  for  everyone  else  but  me?”  

3.  Landed  Costs  

• How  can  a  barcoding  soluOon  help?  

4.  Barcoding  

• OrganizaOon  of  the  warehouse  

5.  Inventory    Bin  Locator  Tracking  

• Smoothing  out  the  process  

6.  Order  Fulfillment  

• Empowering  your  sales  team  

7.  Mobile  Sales  

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1.  ForecasOng  

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Why  is  forecasEng  important?  

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For  every  1%  improvement  in  forecast  accuracy,  businesses  experience  a  drop  in  inventory  levels  between  1%  -­‐  2%    Businesses  can  experience  a  17-­‐point  average  improvement  in  forecast  accuracy  when  adopOng  best  pracOces  and  new  technology    As  a  result,  firms  can  benefit  from  a  17%  -­‐  34%  reducEon  in  inventory  simply  by  implemenOng  a  technology  to  help  improve  forecast  accuracy.  

* Source: Triple Point Technology

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CreaEng  accurate  forecasts.  

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•    How  do  you  segment  your  customers?    Do  you  sell  domesOcally,  or  internaOonally?    Do  you  sell  to  big-­‐box  retailers,  or  small  mom-­‐and-­‐pop  shops?    Do  you  ship  to  mulOple  markets  from  various  warehouses?  

   •  Are  you  a  wholesale  distributor,    or  a  manufacturer,  or  a  combinaEon?  

   If  you  are  a  manufacturer…do  you  consider  yourself  a  MTS  or  MTO      (Made  to  Stock  vs.  Made  to  Order)  business?  

 •  Is  your  business  seasonal?  

 Do  different  products  have  different  seasonal  trends  associated  with    them?  

     

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ForecasEng:  Common  threads  

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 •  You  have  limited  warehouse  space    •  You  need  to  pracOce  “Just  in  Time”  

inventory,  not  “Just  in  Case”    •  Maximize  limited  space  with  the  most  

profitable  and  best  selling  items  

•  A,B,C  ranking  for  replenishment  

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ForecasEng:  Common  threads  

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•  Segment  your  customers  •  Understand  seasonality  trends  •  Rank  your  items  •  No  system  is  “perfect”  

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CollaboraEve  ForecasEng  

10 EffecOve  Inventory  (www.effecOveinventory.com)    

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2.  Container  Tracking  

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Purchasing  from  overseas  

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More  and  more  companies  are  purchasing  from  overseas.        Allows  companies  to  purchase  at  reduced  costs,  but  companies  need  to  track  import  controls.  

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Container  tracking  

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•  U.S.  Customs  

•  Harmonized  Codes    

•  www.exportcontrols.com  

•  INCOTERMS  

•  Bill  of  Lading  

•  CIF  

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Container  tracking  

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 •  Modify  PO  Lines  

•  Add  fields  for:  •  Container  ID  •  Vessel  •  ETA  •  BOL  •  QuanOty  Shipped    

•  Receive  into  an  “In  Transit”  Warehouse  •  Title  transfer  •  Transfer  goods  from  In  Transit  to  Main  warehouse  

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Container  tracking  

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3.  Landed  Costs  

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Landed  Costs  

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How  much  it  cost  to  get  it  here?    •  TransportaOon  costs  •  Insurance  charges  •  DuOes  •  VAT  •  Customs  assessments  •  Etc.  

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Landed  Cost  

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www.exportcompliance.com/landed-­‐cost-­‐calculator.html  

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4.  Barcoding  

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Barcoding  

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•  Inventory  accuracy  

•  Faster  and  efficient  receiving  

•  Reduces  errors  when  picking,  packing  and  shipping  

•  Quick  inventory  counts  

 

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Barcoding  

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5.  Inventory  Bin  Level  Tracking  

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}  Install  a  flexible  material  storage  system  that  allows  products  to  be  stored  to  minimize  the  cost  of  filling  orders  

} Label  floor  areas,  aisles,  shelving  units,  shelves  

} A  bin  is  any  designated  storage  locaOon  ◦ Shelves  ◦ Pallet  racks  ◦ Floor  areas  

} With  a  good  bin  system,  a  new  employee  will  be  producOve  on  his/her  second  day  of  employment  

©  EIM,  Inc.  

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Assign  and  Use  Bin  LocaEons  

SAGE  NORTH  AMERICA    

• Fixed  LocaOons  • Random  LocaOons  • Holding  Bins  

Make  sure  your  material  handling  capabili6es  can  handle  your  peak  level  of  ac6vity  

©  EIM,  Inc.  

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Three  Types  of  Storage  LocaEons  

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•   Space  is  reserved  for  a  specific  product    

•   If  the  item  is  out  of  stock,  the  space  remains  empty,  awaiOng  the  replenishment  shipment    

•   The  “pick  face”  contains  the  fixed  bin  locaOons  used  to  normally  store  products    

•   A  product  can  have  mulOple  fixed  bins  in  a  warehouse  

©  EIM,  Inc.  

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Fixed  Bin  LocaEons  

SAGE  NORTH  AMERICA    

Item #A100

3rd Level2nd Pallet

02 01

04 03

06 05

02 01

04 03

06 05

Aisle 1 Aisle 2 Aisle 3

2nd Level3rd Pallet

1st Level1st Pallet

©  EIM,  Inc.  

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Random  Bin  LocaEons  

What  do  random  bin  loca6ons  require?  

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Random Bins - Surplus

Fixed Bins - Stock

Fixed Bins - Stock

Fixed Bins - Stock

Fixed Bins - Stock

Fixed Bins - Stock

Random Bins - Surplus

Fixed Bins - Stock

Fixed Bins - Stock

Fixed Bins - Stock

Fixed Bins - Stock

Fixed Bins - Stock

Random Bins - Surplus

Fixed Bins - Stock

Fixed Bins - Stock

Fixed Bins - Stock

Fixed Bins - Stock

Fixed Bins - Stock

©  EIM,  Inc.  

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Random  Bin  LocaEons  Used  to  Store  Surplus  Stock  

•  Surplus  stock  is  stored  above  pick  face  bins  •  Use  erasable  magne6c  labels  to  designate  the  loca6on  of  surplus  stock  

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• Holding  bins  are  used  to  store  material  that  is  not  currently  available  to  customers:  – InspecOon  – Returned  Goods  – Rework/Repair  – Repackaging  

©  EIM,  Inc.  

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Holding  Bins  

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Shipping, Staging and Receiving

Jones Products

Cates Products

Tubing and Brass Fittings

Smith Products

Murphy Products

Plastic Fittings

Chemicals

Clairmont Products

Bryer Products

Wedge Products

©  EIM,  Inc.   29

TradiEonal  Warehouse  Layout  

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"B" Ranked Items

"A" Ranked Items

Shipping,Staging andReceiving

"D" RankedItems

"C" RankedItems

SurplusandBulk

Storage

DeadStock

©  EIM,  Inc.  

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Rank  Based  Storage  Warehouse  

SAGE  NORTH  AMERICA    

Shelving  Units  

Poor Location

Poor Location

Prime Location

Prime Location

Fair Location

Fair Location

•   IdenOfy  most  accessible  bins  in  each  storage  secOon    

•   Stock  items  with  highest  hits  at  eye  level    

©  EIM,  Inc.  

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SAGE  NORTH  AMERICA    ©  EIM,  Inc.  

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Bin  Locator  System  

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6.  Order  Fulfillment  

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AccumulaOon  of  all  of  the  costs  involved  in  maintaining  inventory  in  your  facility  – Cost  of  pukng  away  stock  receipts  and  moving  material  within  the  warehouse  

– Insurance  on  inventory  – Rent  and  uOliOes  for  the  porOon  of  your  warehouse  used  to  store  material  

– Physical  inventory  and  cycle  counOng  – Inventory  shrinkage  and  obsolescence  – Opportunity  cost  of  the  money  invested  in  inventory  

       

©  EIM,  Inc.  34

Carrying  Cost  (“K”  Cost)  

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Cost  of  Filling  an  Outgoing  Order  Includes  

• Labor  associated  with  filling  orders  • Cost  of  shipping  supplies  •   %  of  the  cost  of  capital  improvements  to  the  warehouse  

• %  of  the  depreciaOon  expense  associated  with  warehouse  equipment    

• %  of  warehouse  insurance    

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©  EIM,  Inc.  

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Calculate  the  Cost  of  Filling  an  Order  

• Total  warehouse  labor  • The  number  of  orders  shipped  during  the  past  12  months  

• The  average  number  of  line  items  on  each  customer  order  

• The  number  of  orders  that  can  be  filled  per  hour  

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©  EIM,  Inc.  

SAGE  NORTH  AMERICA    

Cost  of  Shipping  Supplies  

• The  annual  cost  of  shipping  supplies  (boxes,  bags,  shipping  tape,  Styrofoam  “peanuts”,  etc.)  is  a  direct  expense  for  filling  orders.    The  enOre  amount  is  part  of  part  of  the  cost  of  filling  an  order  

37 ©  EIM,  Inc.  

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Improvements,  Equipment,  and  Insurance  • DepreciaOon  for  warehouse  improvements  financed  equipment  and  insurance  have  to  be  allocated  among  all  warehouse  funcOons.    We  typically  use  the  same  percentages  derived  from  analyzing  the  division  of  labor.  

• 80%  of  warehouse  labor  is  devoted  to  filling  orders  

DescripEon   Annual    Cost   80%  of  the  Cost  

Improvement  DepreciaOon  

$20,000   $16,000  

Insurance   $3,700   $2,960  

Financed  Equip   $4,620   $3,696  

Total   $22,656  

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©  EIM,  Inc.  

SAGE  NORTH  AMERICA    

Time  to  Pick  an  Order      

• Acme  has  five  full  Ome  pickers  • There  are  10,000  hours  available  to  pick  each  year:  – 8  hours  per  day  *  250  work  days  *  5  Pickers  =  10,000  hours  

• Five  full  Ome  order  pickers  pick  the  57,855  orders  in  the  10,000  hours  

• Average  amount  of  Ome  to  fill  an  order:  – 57,855  Orders  ÷  10,000  Orders  =  5.78  Orders/Hour  or  (10.38  minutes  per  order)  

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©  EIM,  Inc.  

SAGE  NORTH  AMERICA    

Time  to  Pick  an  Order  

• Time  in  moOon  analysis  showed  that  in  filling  an  order:  –   2/3  of  the  Ome  is  spent  pulling  material  – 1/3  of  the  Ome  is  spent  packing  and  staging  the  order    

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©  EIM,  Inc.  

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• QuanOOes  on  stock  receipts  “tagged”  to  specific  orders  – Ensures  that  the  right  customer  gets  the  product  

• Backorder  availability  report  – Shows  what  backorders  can  be  filled  from  current  stock  receipts  

• Minimizes  material  handling  as  orders  can  be  filled  on  the  receiving  dock  and  sent  to  staging  or  shipping  bypassing  the  warehouse  storage  area  

©  EIM,  Inc.  

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Cross  Dock  Whenever  Possible  

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Order Bin Item Qty to Pick Qty Picked12004 A-02-04-02 41-FS04 ¼” Flare Nuts 100 10012012 A-02-04-02 41-FS04 ¼” Flare Nuts 25 2512004 A-02-04-08 48-F04X04 ¼” x ¼” Male x Flare Connector 200 20012016 A-03-06-06 49-F04X04 Male x Flare 90 Connector 15 15

©  EIM,  Inc.  

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Wave  Pick  Sheet  

•  Reduces  “dead  head”  Ome  •  Pick  mulOple  orders  at  one  Ome  •  Appropriate  for  numerous  one  and  two  line  orders  •  Requires  that  orders  be  “assembled”  during  the  packing  process  and  

that  packing  slips  be  printed  in  addiOon  to  pick  Ockets  

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}  Customer  orders  with  mulOple  lines  are  separated  based  on  locaOon  of  the  primary  pick  locaOon  for  each  item  

◦  Appropriate  for  large  warehouses  

©  EIM,  Inc.  

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Zone  Picking  

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• In  a  full  physical  all  stocked  products  in  a  locaOon  are  counted  at  one  Ome  (usually  once  a  year)  

• Some  problems  with  a  full  physical  inventory:  – Time  constraints  and  customer  service  (all  acOvity  must  stop  during  count)  

– Counters  may  not  be  properly  trained  and  may  not  have  a  vested  interest  in  the  goodness  in  the  count  

– Even  if  physical  is  accurate,  how  long  will  it  remain  accurate?  

©  EIM,  Inc.  

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Full  Physical  Inventory  vs.  Cycle  CounEng  

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} Cycle  counOng  is  the  process  of  counOng  part  of  your  stock  inventory,  every  day  

} Cycle  counts  usually  result  in  more  accurate  computer  stock  levels  than  annual  physical  inventories  

} Without  accurate  stock  levels,  effecOve  inventory  management  is  impossible  

} Goal  =  2%  to  3%  tolerance  level      

©  EIM,  Inc.  

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Make  Cycle  CounEng  Part  of  Your  Regular  Business  Procedures  

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}  Bins/items  with  a  large  number  of  hits  are  counted  more  ouen  

}  Every  Ome  someone  goes  to  a  bin  to  pull  an  order  is  another  opportunity  for  a  error  or  “unquality  event”  to  occur    

}  These  items  are  more  likely  to  have  inaccurate  quanOOes  and  should  be  counted  more  ouen.  

}  Slow  moving  products  usually  have  great  accuracy  and  therefore  can  have  an  extended  count  cycle      

©  EIM,  Inc.  

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Cycle  Counts  Based  on  Product  Rank  

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• Count  “A”  items  six  Omes  a  year  • Count  “B”  items  once  or  twice  a  year  • Count  “C”,  “D”  and  “X”  items  once  a  year  

Best  for  maintaining  accurate  stock  levels  Consider  adding  high  value  and  frequently  pilfered  items  to  the  “A”  group  

 

©  EIM,  Inc.  

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Cycle  Count  Rank  Based  on  Hits  

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7.  Mobile  Sales  

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Mobile  Salesforce  

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Thank  you  

QuesEons?    

Want  to  learn  more?  ralph@southeastcomputers.com  

305-­‐556-­‐4697  

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