intelligent inventory control
TRANSCRIPT
INTELLIGENT INVENTORY CONTROL
Behaviors & Tools
May 22, 2013
FLOW
The Theory
Forecasting Right
Bullwhip
Laws of Logistics
Case Study – IRAQ
Q&A
INVENTORY THEORY
WHAT DOES IT CONSTITUTE?
that is sold day in day out - cycle stock
which is on the move - frozen stock
built for an event or season - anticipation stock
kept for protection against variability - safety stock
But most importantly it is $$$ blocked
IT DEPENDS ON …
α Lead Time
α Demand Forecast
α Service Level
α Frequency of Sale
α EOQ’s
β Shelf Life
β Distance from Source
β Logistics Cost
β Customer Tolerance
β Supplier Reliability
β Capacity
β Profitability
β Lost Sales Acceptance
BULLWHIP EFFECT
It creates large swings in demand on the supply chain resulting from relatively small, but unplanned, variations in consumer
demand that escalate with each link in the chain.
LAWS OF LOGISTICS
Circular References
Volatility is attributable to time lags
Time lags are inserted to optimise functional cost
Cost is not necessarily lowered by slowing things down
Slowing things down is a function of variety and complexity
Variety and complexity mean it all gets ‘too difficult’
which is why we don’t trust anyone & we slow things down more
adding more time creates volatility
volatility costs money so we add more time
adding more time makes us careless and unreliable
unreliability requires focus so we form BUs and add more complexity
LAW # 2: TOTAL COST
“The total cost of sourcing, converting and delivering product is seldom the sum of the lowest functional
costs of each element in the supply chain”
lowest cost manufacturing programs are not enough
Driving down cost in specific area can have impact in other
ULTIMATELY: COUNTER-INTUITION
“The normal human response to the effects inefficiency
is to introduce delay in an attempt to increase
certainty which simply makes the situation worse -
effective distribution design can be counter
intuitive”
CASE STUDY - IRAQ
LANDSCAPE
33 million people growing at almost 3%
Half the population is under 21 years of age
GDP of over USD 130 billion growing at 10%
Food consumption to grow ahead of population
Major consumers of yoghurt and cheese
A very important market for us!
CHALLENGE
Acute power shortages
Electricity supply fulfills only about 2/3rd of demand
Transport network both insufficient and old
Low purchasing power with one fourth population
below poverty line
Volatile regulatory environment
A very fragile cold chain!
TOOLS
VMI / SMI / JIT
Kanban to achieve JIT (mfg)
iLog for Design of your SC
inFlow, Inventoria, Stock it Easy for
inventory management
GT Nexus for In Transit Info
Slingshot, Forecast Pro, Epicore, JDA for
demand forecasting
QUESTIONS?
Acknowledgments
Cranfield University
Accenture
Kellogg School of Management
Procter & Gamble Ltd.
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