INTENSIVE INVENTORY MANAGEMENT PROGRAM

Download Intensive Inventory Management Program deals with the STOCK processes such as inventory stratification, forecasting and replenishment. Inve...

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PROGRAM OUTLINE >>

Inventory Stratification



• Methods • Policies

>>

Forecasting

>>

>>



• Demand pattern analysis • Methods

Replenishment • EOQ • Reorder point • Policies • Service Vs Cost Matrix

>>

>>

>>

Stock Analyzer • Spreadsheet-based analyzer • Financial Statements • Critical Variables Input • Financial Metrics Output

Inventory Best Practices • Process Description • Common, Good and Best Practices • Methodology Description • Key Performance Indicators

Conclusion

Performance Assessment & Benchmarks

“We collaborated with Texas A&M on an inventory stratification project which has resulted in a successful classification of our inventory based on item level profitability. We have already seen a significant reduction in capital employed and expect to benefit from further decreases.”

REGISTER NOW!

http://id.tamu.edu

Kevin C. Reid, Vice President - Procurement ThyssenKrupp Materials, N. A.

• Process Assessment Framework • Process Assessment Workbook • Financial Benchmarking - Asset Efficiency, Cash Flow, Growth, Profitability

KEY TAKE-AWAYS >>

Reduce obsolescence and right-size inventory investments

>>

Maximize your ROI on inventory while balancing customer service

>>

Measure forecast accuracy through focused forecasting

>>

Optimize safety stock investment

>>

Minimize total relevant cost

>>

Manage item-level profitability

>>

Effective use of IT & human resources

WHO SHOULD ATTEND? >>

Inventory Planners / Coordinators

>>

Inventory Managers

>>

Purchasing Professionals

>>

Anybody who manages inventory in your firm

“I was impressed with the overall program at TAMU. When I look back to the program, I was impressed with the Item Stratifica- tion segmentation of Critical (A&B) Items and (C) Items.” Randy Thomas, Regional Manager, Wilson Supply

Fermier Hall, MS 3367 Texas A&M University College Station, TX 77840-3367 Phone: 979-845-4984 Fax: 979-845-4980 http://id.tamu.edu

Intensive Inventory Management Program

Creating Competitive Advantage Through Education

PROGRAM OVERVIEW



Intensive Inventory Management Program deals with the STOCK processes such as inventory stratification, forecasting and replenishment. Inventory stratification is the process of classifying items into a certain number of categories so that managing them day-to-day does not become unwieldy. The inventory stratification process is usually not well defined or given due importance, and it often gets over-simplified. When appropriately used, it can play a pivotal role in defining policies and procedures for other inventory management

pany in a powerful position with a relatively quick return-on-investment. Therefore in this program you will be exposed to various Inventory stratification methods and taught how to leverage these results for forecasting. SUPPLY CHAIN PLANNING

SUPPLIER

SOURCE

STOCK

STORE

SELL

SHIP

CUSTOMER

SUPPORT SERVICES

The program will demonstrate various forecasting methods, helping you understand the best method to

DAY 2

DAY 3

Inventory Management WORKING SESSION: WORKING SESSION: Overview Inventory Stratification Forecasting

DAY 4

DAY 5

WORKING SESSION: Replenishment/Service vs. Cost Matrix

WORKING SESSION: Process Assessment Stock Group

Key Performance Attendees to Present Demand Pattern Attendees to Indicators and EXERCISE Results and Policies Classification Present Results

processes such as forecasting and replenishment. Inventory stratification must be done prior to addressing other inventory/purchasing related processes because it acts as a sledgehammer and thereby, places the com-

DAY 1



EXERCISE: Inventory Carrying Cost

EXERCISE: Linking Inventory Management to Shareholder Value

Inventory Stratification - Replenishment Policies Debrief and Discussion Concluding Remarks

Inventory Stratification Forecasting

EXERCISE: Inventory Buy Decision - EOQ Stock Out Cost

Inventory Management Challenges and Benefits EXERCISE: Inventory Management Recap

EXERCISE: Sample EXERCISE: Forecasting Replenishment Policies - Stratification Analysis Rounds 1 & 2 Continued

GUEST LECTURE: Inventory Management Business Perspective

ORKING SESSION: W Forecasting Continued EXERCISE: ROP Data Preparation for Inventory Stratification

GUEST LECTURE: Certification Presentation Inventory Management IT Perspective

Discussion and Discussion and Questions Questions

Discussions and Questions

CASE STUDY: Stock Group Discussion and From Optimizing Questions Distributor Profitability book

use for your business setting. You will get hands on experience analyzing demand patterns, applying various forecasting methods and evaluating forecast error to choose the best method. The program will also help you understand the concept of “What to order?” and “How to order?” for making replenishment decisions.

DELIVERABLES

Hands on sessions to decide the reorder point and reorder quantities will enhance your decision making process in your business.

Optimizing Distributor Profitability

You will also hear success stories and steps to implement inventory management best practices from

T YP ICAL I NVE NTORY M IX

Best Practices to a Stronger Bottom Line

industry experts from both business and IT perspectives. The STOCK exercise will walk you through

I DEAL I NVE NTORY M IX

A

A

the process of connecting inventory decisions to shareholder value through your financial statements.

B

At the end of the program you will be able to assess the stock processes in your company and develop a plan of action to implement best practices at your company right away.

C

B Texas A&M multi-criteria inventory stratification

C D

D F. Barry Lawrence • Senthil Gunasekaran • Pradip Krishnadevarajan

Stratification Fill Rate Forecasting

STOCK ANALYZER ‐ INVENTORY STRATIFICATION INVENTORY REDUCTION / REDEPLOYMENT WORKSHEET OBJECTIVE Perform Inventory Reduction and Inventory Redeployment (to A & B items) and evaluate the net impact on Return on Net Assets (RONA)

72,086,870 16,635,432

Current Inv $

Current Sales $

Current COGS $

$ 17,470,663 28% 21% 25% 26%

$ 148,265,879 65% 18% 15% 2%

$ 110,902,877 65% 18% 15% 2%

$ $

19,962,518 2,218,058

Refer Current Turns

Lead Time

Safety Stock

% Inventory considered for reduction / redeployment N/A N/A

Current Sales $ (by item rank)

$ $

Current Turns (by item rank) 14.7 3.8

5.4 0.5

Where do you want to redeploy inventory (%) N/A

Inv $ available for reduction / redeployment (by item rank) N/A

N/A

Sum

Total Inv $ available for reduction /

% Inventory for Redeployment

% Inventory for Reduction

N/A

Redeployed Inventory $

Reduced Inventory $

Expected Turns upon Redeployment N/A

N/A

96,372,821 22,239,882

Current Sales $ (by item rank)

$ 26,687,858 $ 2,965,318

$ $

N/A

96,372,821 22,239,882

$ $

26,687,858 2,965,318

New Sales $ (by item rank)

Lost Sales $ (by item rank) Lost Sales % due to Inventory Reduction / Redeployment

Additional Sales $ (by item rank)

Redeployed Inventory $ (by item rank)

N/A

Sum New Total Sales $

N/A

New Total GM $

N/A

New Total COGS $

COGS $ as % of Sales $ 74.8%

Current Employee Comp Outside $

9,059,045

Current Employee Comp Others $

9,385,230

Current Warehouse Exp $

4,477,630

Current Delivery Exp $

4 536 936 4,536,936

Current Other Op. Exp (G&A) $

2,194,335

Current EBITDA $ $ 7,709,826 Variable 75%

$ 6,794,284

Variable 10%

$ 938,523

Variable 50%

$ 2,238,815

New Total Sales $

148,265,879

$

New EBITDA $

-

New Total Var Op.Exp

Total Variable Operating Exp $

Other Income & Exp $

Current Total Sales $ $

New Total Op Exp $

15,246,922

Total Fixed Op. Exp $ 14,406,254

Variable 80%

$3,629,549 3 629 549

Variable 75%

$1,645,751

Interest Income

Interest Income % 12%

$

-

Current RONA % 23.57%

New RONA %

Current Total Inventory $ Sum

Reorder Point

$

17,470,663

New Total Inventory $

Reduced Inventory $ Other Current Assets $

Balance Sheet eet Elements

Demand During Lead Time

Profit & Loss Elements

Current Inventory $ (by item rank) $ 4 891 786 $ 4,891,786 3 3,668,839 668 839 $ 4,367,666 $ 4,542,372

Opeerating Expenses

DATA

Total A B C D

Current COGS $ (by item rank)

$ $

New Total Sales $

1,978,468

Fixed & Non-current Assets $

Current DSO

New Total Assets

6,153,034

NewTotal A/R $ 46.4

# days in a year

C Currentt N Nett A Assets t $ 32,705,777

Cash & Market. Securities 365

$

New Total COGS $

New Net Assets $

1,990,029

Notes Payables $

Current DPO

1,427,456

New Total A/P $

New Total Current Liabilities

32.5

# days in a year

Other Current Liabilities 365

$

2,404,335

Replenish

“Through knowledge learned from the inventory management program, attended by all our management and key salespersons, we have reduced our total inventory levels by over 20%” Brent A. Burns, Vice President, ISC Building Materials, LP

REGISTER NOW!

http://id.tamu.edu

“Texas A&M’s research has allowed our company to continue to stay ahead of our competition and excel in customer service.” Tim Miller, Vice President – Operations, Security Contractor Services, Inc.

PROGRAM OVERVIEW



Intensive Inventory Management Program deals with the STOCK processes such as inventory stratification, forecasting and replenishment. Inventory stratification is the process of classifying items into a certain number of categories so that managing them day-to-day does not become unwieldy. The inventory stratification process is usually not well defined or given due importance, and it often gets over-simplified. When appropriately used, it can play a pivotal role in defining policies and procedures for other inventory management

pany in a powerful position with a relatively quick return-on-investment. Therefore in this program you will be exposed to various Inventory stratification methods and taught how to leverage these results for forecasting. SUPPLY CHAIN PLANNING

SUPPLIER

SOURCE

STOCK

STORE

SELL

SHIP

CUSTOMER

SUPPORT SERVICES

The program will demonstrate various forecasting methods, helping you understand the best method to

DAY 2

DAY 3

Inventory Management WORKING SESSION: WORKING SESSION: Overview Inventory Stratification Forecasting

DAY 4

DAY 5

WORKING SESSION: Replenishment/Service vs. Cost Matrix

WORKING SESSION: Process Assessment Stock Group

Key Performance Attendees to Present Demand Pattern Attendees to Indicators and EXERCISE Results and Policies Classification Present Results

processes such as forecasting and replenishment. Inventory stratification must be done prior to addressing other inventory/purchasing related processes because it acts as a sledgehammer and thereby, places the com-

DAY 1



EXERCISE: Inventory Carrying Cost

EXERCISE: Linking Inventory Management to Shareholder Value

Inventory Stratification - Replenishment Policies Debrief and Discussion Concluding Remarks

Inventory Stratification Forecasting

EXERCISE: Inventory Buy Decision - EOQ Stock Out Cost

Inventory Management Challenges and Benefits EXERCISE: Inventory Management Recap

EXERCISE: Sample EXERCISE: Forecasting Replenishment Policies - Stratification Analysis Rounds 1 & 2 Continued

GUEST LECTURE: Inventory Management Business Perspective

ORKING SESSION: W Forecasting Continued EXERCISE: ROP Data Preparation for Inventory Stratification

GUEST LECTURE: Certification Presentation Inventory Management IT Perspective

Discussion and Discussion and Questions Questions

Discussions and Questions

CASE STUDY: Stock Group Discussion and From Optimizing Questions Distributor Profitability book

use for your business setting. You will get hands on experience analyzing demand patterns, applying various forecasting methods and evaluating forecast error to choose the best method. The program will also help you understand the concept of “What to order?” and “How to order?” for making replenishment decisions.

DELIVERABLES

Hands on sessions to decide the reorder point and reorder quantities will enhance your decision making process in your business.

Optimizing Distributor Profitability

You will also hear success stories and steps to implement inventory management best practices from

T YP ICAL I NVE NTORY M IX

Best Practices to a Stronger Bottom Line

industry experts from both business and IT perspectives. The STOCK exercise will walk you through

I DEAL I NVE NTORY M IX

A

A

the process of connecting inventory decisions to shareholder value through your financial statements.

B

At the end of the program you will be able to assess the stock processes in your company and develop a plan of action to implement best practices at your company right away.

C

B Texas A&M multi-criteria inventory stratification

C D

D F. Barry Lawrence • Senthil Gunasekaran • Pradip Krishnadevarajan

Stratification Fill Rate Forecasting

STOCK ANALYZER ‐ INVENTORY STRATIFICATION INVENTORY REDUCTION / REDEPLOYMENT WORKSHEET OBJECTIVE Perform Inventory Reduction and Inventory Redeployment (to A & B items) and evaluate the net impact on Return on Net Assets (RONA)

72,086,870 16,635,432

Current Inv $

Current Sales $

Current COGS $

$ 17,470,663 28% 21% 25% 26%

$ 148,265,879 65% 18% 15% 2%

$ 110,902,877 65% 18% 15% 2%

$ $

19,962,518 2,218,058

Refer Current Turns

Lead Time

Safety Stock

% Inventory considered for reduction / redeployment N/A N/A

Current Sales $ (by item rank)

$ $

Current Turns (by item rank) 14.7 3.8

5.4 0.5

Where do you want to redeploy inventory (%) N/A

Inv $ available for reduction / redeployment (by item rank) N/A

N/A

Sum

Total Inv $ available for reduction /

% Inventory for Redeployment

% Inventory for Reduction

N/A

Redeployed Inventory $

Reduced Inventory $

Expected Turns upon Redeployment N/A

N/A

96,372,821 22,239,882

Current Sales $ (by item rank)

$ 26,687,858 $ 2,965,318

$ $

N/A

96,372,821 22,239,882

$ $

26,687,858 2,965,318

New Sales $ (by item rank)

Lost Sales $ (by item rank) Lost Sales % due to Inventory Reduction / Redeployment

Additional Sales $ (by item rank)

Redeployed Inventory $ (by item rank)

N/A

Sum New Total Sales $

N/A

New Total GM $

N/A

New Total COGS $

COGS $ as % of Sales $ 74.8%

Current Employee Comp Outside $

9,059,045

Current Employee Comp Others $

9,385,230

Current Warehouse Exp $

4,477,630

Current Delivery Exp $

4 536 936 4,536,936

Current Other Op. Exp (G&A) $

2,194,335

Current EBITDA $ $ 7,709,826 Variable 75%

$ 6,794,284

Variable 10%

$ 938,523

Variable 50%

$ 2,238,815

New Total Sales $

148,265,879

$

New EBITDA $

-

New Total Var Op.Exp

Total Variable Operating Exp $

Other Income & Exp $

Current Total Sales $ $

New Total Op Exp $

15,246,922

Total Fixed Op. Exp $ 14,406,254

Variable 80%

$3,629,549 3 629 549

Variable 75%

$1,645,751

Interest Income

Interest Income % 12%

$

-

Current RONA % 23.57%

New RONA %

Current Total Inventory $ Sum

Reorder Point

$

17,470,663

New Total Inventory $

Reduced Inventory $ Other Current Assets $

Balance Sheet eet Elements

Demand During Lead Time

Profit & Loss Elements

Current Inventory $ (by item rank) $ 4 891 786 $ 4,891,786 3 3,668,839 668 839 $ 4,367,666 $ 4,542,372

Opeerating Expenses

DATA

Total A B C D

Current COGS $ (by item rank)

$ $

New Total Sales $

1,978,468

Fixed & Non-current Assets $

Current DSO

New Total Assets

6,153,034

NewTotal A/R $ 46.4

# days in a year

C Currentt N Nett A Assets t $ 32,705,777

Cash & Market. Securities 365

$

New Total COGS $

New Net Assets $

1,990,029

Notes Payables $

Current DPO

1,427,456

New Total A/P $

New Total Current Liabilities

32.5

# days in a year

Other Current Liabilities 365

$

2,404,335

Replenish

“Through knowledge learned from the inventory management program, attended by all our management and key salespersons, we have reduced our total inventory levels by over 20%” Brent A. Burns, Vice President, ISC Building Materials, LP

REGISTER NOW!

http://id.tamu.edu

“Texas A&M’s research has allowed our company to continue to stay ahead of our competition and excel in customer service.” Tim Miller, Vice President – Operations, Security Contractor Services, Inc.

PROGRAM OUTLINE >>

Inventory Stratification



• Methods • Policies

>>

Forecasting

>>

>>



• Demand pattern analysis • Methods

Replenishment • EOQ • Reorder point • Policies • Service Vs Cost Matrix

>>

>>

>>

Stock Analyzer • Spreadsheet-based analyzer • Financial Statements • Critical Variables Input • Financial Metrics Output

Inventory Best Practices • Process Description • Common, Good and Best Practices • Methodology Description • Key Performance Indicators

Conclusion

Performance Assessment & Benchmarks

“We collaborated with Texas A&M on an inventory stratification project which has resulted in a successful classification of our inventory based on item level profitability. We have already seen a significant reduction in capital employed and expect to benefit from further decreases.”

REGISTER NOW!

http://id.tamu.edu

Kevin C. Reid, Vice President - Procurement ThyssenKrupp Materials, N. A.

• Process Assessment Framework • Process Assessment Workbook • Financial Benchmarking - Asset Efficiency, Cash Flow, Growth, Profitability

KEY TAKE-AWAYS >>

Reduce obsolescence and right-size inventory investments

>>

Maximize your ROI on inventory while balancing customer service

>>

Measure forecast accuracy through focused forecasting

>>

Optimize safety stock investment

>>

Minimize total relevant cost

>>

Manage item-level profitability

>>

Effective use of IT & human resources

WHO SHOULD ATTEND? >>

Inventory Planners / Coordinators

>>

Inventory Managers

>>

Purchasing Professionals

>>

Anybody who manages inventory in your firm

“I was impressed with the overall program at TAMU. When I look back to the program, I was impressed with the Item Stratifica- tion segmentation of Critical (A&B) Items and (C) Items.” Randy Thomas, Regional Manager, Wilson Supply

Fermier Hall, MS 3367 Texas A&M University College Station, TX 77840-3367 Phone: 979-845-4984 Fax: 979-845-4980 http://id.tamu.edu

Intensive Inventory Management Program

Creating Competitive Advantage Through Education