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
