Business Basics
Home Page


Who is Bill Gaw?
And why should we
listen to him?

 

lean manufacturing principles and techniques training

Need a training tool that transforms MRP supporter into LEAN-MRP advocates?
LEAN-MRP Simulation Game-Plus

Lean Certification at your place and at
your pace with a "pay-as-you-go" plan.
Lean Manufacturing Certification

Customer Service Inventory
Step  6 of 8


Get Bill Gaw's Lean Manufacturing Book
$15.00 Click Here

 


privacy policy

987

760-945-5596

Mfg. Training Options:

Lean Manufacturing Transformation

LEAN-MRP Simulation Exercises

Lean Manufacturing Certification Program

Lean Manufacturing
on-site Seminars

Inventory Management
Training Program

Lean Manufacturing, PowerPoint, 8-CD, Training Library

Lean Management PowerPoint Training Modules

Lean Management PowerPoint Training

Lean Manufacturing Assessment and Improvement Plan

Kaizen Training
(On-site Program)

ISO 9001-2008 Compliance and/or Registration

Strategic Planning Training Program

Manufacturing Perform-ance Management Training Program

Thinking-Outside-
the-Box Workshop

Lean Manufacturing Articles

ABC ANALYSIS

Finally, we can aggregate our inventory by relative im­portance. A common technique is known as ABC, Pareto, or the rule of 80-20 (or possibly 90-10), and the most common criteria is annualized cost. For example, we may find that 10 or 20 percent of our raw material items rep­resent 80 or 90 percent of our total annual cost of pur­chases. We would label these "A" items. Another 20 ot 30 percent might be "B" items and the balance of our inventory, maybe 50 percent, would be "C" items. Some companies add a "D" category for obsolete or discon­tinued items. This allows us to set different rules for the different categories. In cycle counting, for example, we might say that "A" items will be counted once every month, "B" once a quarter, and "C" once a year.

Annualized cost, which is unit cost times annual con­sumption, may not be the best criterion to use. You may find that lead time or sole source better fits your needs. I used to use special color paper in my copier. Only one supplier offered what I wanted and the cost was high. Colored paper was my "A" item. Toner cartridges must fit my copier, but they are available from several sources, so I classify them as "B" items. I can get generic staples from any office supply house and the price is very com­petitive. Staples are my "C" item.

INVENTORY DECISIONS

We have been talking about types and functions of in­ventory, all topics within the traditional scope of inven­tory management and control. But inventory decisions are made by people throughout our organization. Let's talk about some common inventory decisions.

Forecasting

Accurate forecasting is important regardless of our in­ventory strategy. In make-to-order, we can get the best service and price if we provide our suppliers with planned purchases. With assemble-to-order, we need to plan and build semi-finished inventory. Make-to-stock requires us to produce the finished goods prior to re­ceiving the customer orders. All depend on an accurate and timely forecast.

My handouts are made to stock. I recorded atten­dance from my past presentations, usually at chapter dinner meetings, discarded an atypical outlier, then used linear regression to forecast demand. As you can see, an error in forecasting can have devastating results when it comes to customer service.

Product Design

The design of our product can have a significant im­pact on our inventory levels and, therefore, on our cus­tomer service. Minimizing the risk of spoilage, shrinkage, or damage will help everyone in the supply chain, and maximizing the usage of standard components will re­duce costs and open multiple sourcing opportunities.

My original version of the handout used different page colors for each topic. When I switched to a generic white paper, I had fewer raw material part numbers to manage, which simplified my work, improved my fore­cast accuracy, and allowed me to qualify for some quan­tity price breaks. Further, generic white is available from a large number of suppliers. This helps me negotiate better prices while ensuring availability. I used concur­rent engineering, which allowed me to select paper ven­dors while the text of the handout was still being written. I carefully documented the change in my bill of materi­als (BOM) so my materials requirements planning (MRP) system would calculate orders for white paper rather than the old colored papers.

To Be Continued

For balance of this article, click on the below link:

Lean Manufacturing Articles and click on Series 14


   Increase Your Knowledge... Stay Connected
Join our 15,000 plus MBBP
Bulletin Subscribers

To stay current on Lean Manufacturing principles and techniques, subscribe to our Manufacturing Basics and Best Practices Bulletin (MBBP) and we'll send you our 10-PowerPoint-Plus, Lean Manufacturing, Mini-Modules. (All at no cost of course.)

  Your personal information will never be disclosed to any third party.

First Name:
Your E-Mail:

Here's what one of our 13,000 plus subscribers wrote about the MBBP Newsletter:

"Great manufacturing articles. Thanks for the insights. I often share portions of your articles with my staff and they too enjoy them and fine aspects where they can integrate points into their individual areas of responsibilities. Thanks again."

               Kerry B. Stephenson. President. KALCO Lighting, LLC


"Back to Basics" Training for anyone ... anywhere ... anytime

Business Basics, LLC
6003 Dassia Way, Oceanside, CA 92056
West Coast: 760-945-5596 

© 2001-2013 Business Basics, LLC