INVETORY
MANAGEMENT
Presented By:
Leydi Velez
Ahmed Al Shaeef
Herbert Guerrero
John Herrera
EIN 5346 Logistics Engineering
Chapter 9
Agenda
I.
Contemporary Approaches to
Managing Inventory
1.
2.
3.
4.
Inventory Management Software
Vendor-Managed Inventory (VMI)
Just-in-Time (JIT)
JIT Case Study
Inventory Management
Software
Inventory Management
Software
Benefits:
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Eliminate manual inventory management processes
thereby reducing errors and lead time.
Provides managers easy access to the numbers that are
needed for reporting and restocking information.
Provides complete real-time visibility into demand,
supply, costs and fulfillment measures and trends.
Significantly improve your relationships with suppliers,
vendors and partners by providing self service and realtime visibility.
Inventory Management
Software
Benefits Continued:
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Improve demand planning/reduce forecast error rate
Reduce lost sales and backorders
Increase inventory turnover
Manage large numbers of styles and SKUs efficiently and
accurately
Improve management understanding of forecasting and
inventory management process and performance
Increase sales and profits
Inventory Management Software
inFlow
Inventory software for small to
mid-sized businesses. divided up
into four main modules:
1. Sales – Sales Orders and Customer
Information
2. Purchasing – Purchase Orders and
Vendor Information
3. Inventory – Product Information,
Stock Quantities, Stock Adjustments,
etc.
4. Reports – Reports offered by inFlow
to gather and share information
http://www.inflowinventory.com/
Download options:
Free Edition, Regular Edition ($299/license), Premium Edition ($499/license)
Inventory Management Software
Traker Systems
Software development company providing
Inventory Control Software for 3PL Public
Warehouses, Manufacturers, and
Distributors.
Inventory Control TrackerTM
1. Inventory records are updated
automatically
2. Notifications (reaching expiration date)
3. Multiple warehouse tracking
4. Track items by item #, lot #, production
code, date, carrier, consignee.
http://www.trakersystems.com
Editions: 3PL Public Warehousing Edition,
Manufacturing & Distribution Edition, Lite Edition
Inventory Management Software
FishBowl Inventory
Inventory Management system for small to medium-sized
companies that integrates with Quickbooks.
Features:
1. Multi-location inventory tracking
2. Manufacturing
3. Part Tracking
4. Unit of measure
5. Drop shipping
6. Bar coding
7. Credit card processing
8. Variable pricing and discounting
9. Order picking
10.Kitting
www.fishbowlinventory.com
Inventory Management Software

AdvanceWare Technologies,
AdvancePro Inventory
http://www.advanceware.net

NetSuite
http://www.netsuite.com/portal/products/netsuite/supplyinventory/main.shtml

Direct Tech, Inc. Forecast*21
(Inventory forecasting)
http://www.direct-tech.com
Inventory Optimization Software

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Mincom Critical Inventory Optimization (MCIO) is
an intelligent, predictive software solution that identifies
the optimal holdings of every stock item based on usage
patterns and criticality. MCIO automatically analyzes and
adjusts stock levels and reordering requirements on an
ongoing basis.
SmartOps Enterprise Inventory Optimization (EIO) is
a comprehensive suite of software modules that enables
organizations to plan and manage inventories across global
supply chains. SmartOps EIO encapsulates sophisticated,
proprietary algorithms into software that integrates with
enterprise planning systems and handles large-scale,
complex supply chains in a dynamic and automated
manner.
Inventory Optimization Software
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JDA’s Network & Inventory Optimization uses
deterministic and stochastic optimization combined with
flexible user-interface and analytical workbenches
Smartcorp uses proven forecasting solutions that
accurately predict, for each product item, the most likely or
expected value for demand over a given lead time. The
safety stock recommendations and stocking level estimates
that are generated are immediately available for use in
other parts of your corporate planning system
Vendor-Managed Inventory
Challenge
Due to increased global
complexity, companies are
experiencing long lead times
and high demand volatility.
This has resulted in an
increased emphasis on
managing inventory.
Identifying the best practices
and the best tools to
accomplish this has become
critical
Vendor Managed Inventory
VMI is the process where the supplier generates
orders based on mutually agreed objectives and
demand information sent by the customer.
Main Activities
1. Supplier/Vendor has access to customer’s
inventory data
2. Supplier/Vendor is responsible for
maintaining the inventory level required by
the customer
3. Supplier/Vendor replenishes inventory via
scheduled reviews
Benefits

Customer
• Automate Replenishment
process
• Reduced inventory
• Reduced operating costs
• Focus on core process
• Intangibles
 Shorter cycle time
 Greater customer
satisfaction
• Avoid stock-outs

Supplier
• Increased volume
• Forces disciplines
 Measurements
 Communication
• Better planning and
resource use
 Visibility via
information sharing
• Need to eliminate or
reduce non-value-added
activities
• Reduce safety-stock
How to make it work
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Clarify expectations
• How the system will benefit both organizations
in the long term
Agree on how to share information
• Enough information to maintain a steady flow
of goods is necessary
Keep communication channels open
• Misunderstandings need to be studied as
opportunities for learning and then used to
avoid repetitive problems in the future
VMI Flow
Performance Measurements

How to ensure VMI will enhance
the business?
• Establish measures – identify the goal

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Starting number of items vs. expected goal
Inventory $ initially vs. expected goal
Total inventory $ at start, during, and after
Measurements

Operational improvements
• Internal
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The number of stock outs and duration
Cost of material/service before and after
• External

Customer satisfaction
• Improvement of delivery availability
• Other points as defined by the parties
 Competitive advantage considerations
Just-In-Time (JIT)
JUST-IN-TIME (JIT)
JIT is originated in Japan as part of the
Toyota Production System in the approach
to a Lean Production System.
JIT is a strategy that strives to improve a
business’s return on investment by
reducing in-process inventory and
associated carrying cost.
JUST-IN-TIME

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JIT means making only “what is needed, when it is needed,
and in the amount needed.”
JIT supplies “what is needed, when it is needed, and in the
amount needed” according to the production plan to
eliminate waste, inconsistencies, and unreasonable
requirements, resulting in improved productivity
JIT removes inventory to expose production flaws that can
be corrected or removed in order to improve production
quality and increase efficiency and effectiveness .
PROGRESSION TO JIT
JUST-IN-TIME EFFECTS

Increase factory response time.

Improve customer satisfaction.

Build of make-to-order models to eliminate the risk of no
being sold.

Standardization of parts assemblers increasing product
quality.

Reduce setup time allowing the company to reduce or
eliminate inventory for “change-over” time.

The flow of goods from warehouse to shelves improves by
reducing lot sizes to simplify inventory flow and inventory
management.
JUST-IN-TIME BENEFITS
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Employees with multiple skills are used more
efficiently by having the flexibility to move
employees where they are needed.
Production schedule and work hour consistency is
synchronized with demand by avoiding paying
overtime or focus resources to other areas.
Increase emphasis on supplier relationship.
Supplies comes in at regular intervals through
the production day by synchronizing the supply
with the demand.
JUST-IN-TIME LIMITATIONS
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Preconditions to JIT
• Trust must be present between labor/management as
well as suppliers/consumers
• Recognition of processes
• Familiarity with problem solving
• Quality at the source
• Agreement over value and waste
Right Settings
• Applicable in growth to maturity phases of Product Life
Cycle
• Standard Product
• Standard/Fixed Pay-Rate
• Problems with Piece-Rate Scheme
JIT operations may leave suppliers and consumers open to
supply shocks and large supply or demand changes.
JIT Case Study
Stopping Stock Outs with
Anixter’s Just-in-Time Supply
Source: http://www.anixter.com
Case study: Anixter
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Anixter is a leading global supplier of communications and
security products, electrical and electronic wire and cable,
fasteners and other small components.
They provide innovative supply chain management services
to reduce customers' total cost of production and
implementation
For more than five years, Anixter has developed a
relationship with a major manufacturer of medical
equipment.
Anixter supplies this manufacturer with a variety of
fasteners directly delivered to its production facility. The
fasteners are used to build medical equipment from lighting
and cabinets t electro cardiogram testers and examination
tables
Case study: Anixter
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Before Anixter started working with the company,
a normal turnaround on the delivery of parts
would take a week.
This slow turnaround increasingly led to delivery
delays and out-of-stock situations to cover for
the delays and stock-outs. On-site inventory
levels were also increased to cover potential
shortages.
Case study: Anixter
Challenge
 Minimize turnaround on delivered parts.
Solution
 Anixter applied Just-In-Time supply chain
with the objective of keeping the required
amount of products on the manufacturing
floor.
Case study: Anixter
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Two manufacturing facilities located in close to
each other.
More than 2,000 bins placed in seven
stocking locations spread across the two
facilities.
The company placed between 300 to 800 line
orders a week. Providing between 900 and 1,000
part numbers.
Each of the stocking locations needed to meet a
specified min/max range to meet production
goals without overstocking material.
Case study: Anixter
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Anixter implemented a Just-in-Time program that
shifted the inventory to Anixter’s distribution
center to allow for a controlled and planned
release of material to the production facilities.
Anixter established a schedule that allowed the
Anixter employee to scan the bin levels on a
weekly basis.
During the course of the first year, Anixter
worked with the customer to create usage
forecasts.
Solution
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Anixter generated weekly usage reports, which
created minimum and maximum quantity ranges
on the used products without risking stock-outs
or over-delivery.
Based on two- to eight-week requirements,
Anixter successfully worked with the customer
to reduce the amount of on-hand materials and
create an efficient just-in-time solution that kept
the required amount of products on the
manufacturing floor.
Program Results
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Forecasting allowed the manufacturer to gain greater
control over its inventory and set expectations of the levels
of materials that would be kept on the production line and
in its storerooms.
Instead of everything going through separate steps from a
buy to expediter to receiver to quality control to builder,
everything is handled by Anixter.
The manufacturer only had to focus on the building of its
products.
The company has set a goal of doubling its profits in five
years.
Reducing its supplier base by half.
Because of Anixter’s just-in-time program, the supply chain
has built-in flexibility to meet shifting demands.
Benefits Obtained
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Reduced capital investment in components and
associated costs
Increased facility space
Increased efficiency
Improved single point of control for all material
receipt
Eliminated production line shortages and delays
Questions ?