Quick Response Logistics
PART IV.
|
Distribution Resource Planning Here are the inventory management requirements for a quick response competitor. The inventory management process must:
4. Quickly create a transportation unit, i.e. truckload, shipping container, using item minimum and multiple order quantities and allow management to control the number of periods of supply in inventory for all items. Distribution Resource Planning replaces customer orders and aggregate forecasts with customer replenishment plans. Today with so much personal computing power available it becomes easy to frequently revise customer replenishment plans. We did not have the ability,in the past, to replan frequently. Today, frequent replanning is a competitive advantage. Connecting customer replenishment plans means using a computer to add up what your customers plan to order in detail by week, by item for as far into the future as you care to know. This summarized plan is used to plan supplier inventory replenishments in detail by week by item. Current manufacturing and purchasing schedules and projected inventory plans automatically adjust quickly to customer replenishment plans or at least provide an exception message. Distribution Resource Planning presents exceptions to the inventory manager suggesting current management plans for item replenishments be expedited or delayed. Messages identify specific items, orders, dates and quantities that need to be revised to respond quickly to current customer plans. Distribution Resource Planning gives the inventory manager the ability to make a transportation unit order that includes those items most needed as well as enough weight or cube to make full transportation units. Using safety time the inventory manager can equalize the number of periods of supply for all items and order each item in minimum and multiple order quantities by item. Performance Measures Companies are in business to make profit and the best way to make profit is to ship products to customers and get paid for them.
In the first instance we shipped too much and in the second instance we did not ship enough. To measure these two activities we can use two familiar performance measures: inventory turns and projected fill rate. If inventory is turning over quickly, operating costs are less since not only are customers helping by paying quicker but there is less need for storage facilities, material handlers and the quality of products is improved because there is less opportunity to damage the product. A projected fill rate is the percentage of planned sales that can be filled from inventory. If the projected fill rate is high, there are less likely to be lost sales due to lack of product availability. If you could chose to improve two of the following three performance measures: A. Fill Rate B. Inventory Turns C. Forecast Accuracy Which would you choose? Most people would have to agree that inventory turns and fill rate are much more important than forecast accuracy. Forecast accuracy is only one factor that can affect fill rate and inventory turns measures. It is only because we have told ourselves for too long that our problems are forecast related that we tend to want a more accurate forecast. Without the ability to replan frequently there would be a need to have a very accurate forecast. Today we can replan very frequently. What are the other factors affecting fill rate and inventory turns? Some of the factors include: inventory accuracy, order accuracy, frequency of inventory review, minimum and multiple order quantities, frequency of re-distribution of slow moving in inventory and many more factors. A more complete list inventory management problems is provided in Bernie Smith's latest book Focus Forecasting and DRP Logistics Tools of the Twenty-First Century. New Business Partners Businesses need to more than automate their past practices and need to work smarter by utilizing the logistics tools of the twenty first century, Focus Forecasting and DRP. As customers and suppliers connect their sales plans, replenishment plans and inventory plans the goal becomes quick response through the supply chain to meet customer demand. Only by trading information for inventory can businesses achieve quick response. These tools enable businesses to connect to each other in such a way as to ensure they are both working to achieve quick response. Electronic Data Interchange (EDI) is the technology that allows for the quick transfer of information between partners. DRP and Focus Forecasting are the new tools that can turn this information into a competitive advantage. STAY CONNECTED To stay current on bullet-proofed manufacturing solutions, subscribe to our free ezine, "The Business Basics and Best Practices Bulletin." Simply fill in the below form and click on the subscribe button. We'll also send you our free Special Report, "Five Change Initiatives for Personal and Company Success." Your
personal information will never Manufacturing leaders have a responsibility to educate and train their team members. Help for developing a self-directed, World Class Manufacturing training program for your people is just a click away:
You are welcomed to print and share this bulletin with your manufacturing teams, peers, suppliers and upper management ... better yet, have them signup for their own copy at: http://bbasicsllc.com/subscribe.htm With the escalating spam-wars, it's also a good idea to WHITELIST our bulletin mailing domain via your filtering software or control panel:
Manufacturing
Knowledge you’ll not find at offsite
Lean
Six Sigma Consulting World
Class Manufacturing Email: Click here Privacy Policy |