Inventory Basics

Elements of a Supply Chain PRODUCTION

LOGISTICS PROCURMENT

DISTRIBUTIONSCM Process FootprintPLANSOURCEMAKEDELIVERSUPPLY CHAIN

Product Life Cycle ManagementProcurementSourcingSupply chain designDemand forecastingPlanningManufacturing FlexibilityProduction ManagementManufacturing Flow ManagementOrder FulfillmentWarehouse ManagementInventory ManagementTransportation managementFrom a process perspective the supply chain can be viewed as set of processes used to produce and deliver goods and services to customers

Inventory An Element of Logistics

5These activities are not a continuous in nature, hence the need for pivot point(s) for product and information flow in the chain where a firm may store or hold raw materials, semi-finished goods, or finished goods for varying periods of time. Also known as a warehouse. The global contract logistics market grew by 10.3 percent in 2005 to roughly $150 billion.

Logistics Management Gearing the Chain

Warehouse / Store-room / Stock-room/ Depot Traditionally a building for storage of goods

Today referred to as Sequencing and Mixing centre, Logistics centre, Customer service center, Transportation Hub Distribution Center

Warehouse A link in the logistics chainInventory in Logistics - RelevanceCost of Operating a Value Chain

www. Campus. Queens.edu/faculty/ houchinc/ppt/BK12e_Ch13_basic.ppt 8

Inventory Financial ImpactNumber TypeLocation

Warehousing EarlierTodays WarehousingTodaysChallenges Stocking points Fewer SKUs Few Large Orders Smaller Manual Operations Limited Product Lines Localized operations

Distribution Centers Larger No. of SKUs Multiple Smaller Orders Large Automated Warehouses Expansion of Product Lines Global Sourcing and distribution Increased Operational Complexity & Need for value added services Dynamic Location Assignment & Space Optimization Increased handling & picking complexity IT enabled & globally scalable systems & processesChanging Warehousing Paradigms10Concerns and Drivers of the Warehouse Manager :Optimum utilization of existing space more effectively.Optimize storage capacity.Streamline workflow through the facility.Improve productivity and accuracy of order fulfillment process.Reduce receiving and replenishment cycle time.Reduce overall distribution-related operating costs.Handle increasing VAS requirements.Enable the integration of the best-fit WMS with the most appropriate MHE and data capturing devicesIntegrating data from various platforms into a single window information

Inventory Burgeoning GrowthWe consume more We demand more varietyWe demand availability right here right now Lead times are lengthening the China syndrome so, more stock, more safety stock .More to handle and store even with declining inventory/sales ratioJust-in-Time DeliveryImprove the speed of warehouse operationsIntegrate operations to reduce order processing timeGuaranteed AvailabilityOTIFInventory VisibilityFines for non complianceOne Size Fits OneSKU proliferationMixed PalletsShorter product life cyclesLabeling complianceLowest Total CostOTIF at low costImprove labor efficiency InternalProcessingInboundOutbound

Complexity Operational FactorsInventory Storage Echelon Based

Warehouse LayoutBuildingsYardAreaZonesLocationsReceiving Staging AreasPut away AreasProcessing AreasPicking AreasReplenishment AreasReceiving AreasShipping Areas

Warehouse Types Straight/ through Flow

Warehouse Types Inverted T FlowReceivingPut AwayPallet Storage & retrieval SystemsMaterialHandling Cross DockingUnitizing & ShippingCase Picking SystemsBrokenCase Picking SystemsSortationWarehouse Types U or Cross Flow

Warehouse Types Corner Flow

Warehouse Types Modular Flow Based General Inventory TermsASN (Advance Shipment Notification)AS/RS (Automatic Storage/Retrieval System)Batch Picking BOL (Bill of Lading)Carrier Cross Docking ABC (Activity Based Costing)Cycle Counts Order Lead Time Parcel Manifest System Put-Away Random-Location Storage Wave Picking AgingBlind Receiving

General Inventory TermsBack OrderBOM (Bill of Material) Audit CountAdjustmentsConsolidationSlottingSafety Stock/Buffer StockForward Pick LocationFill RateFTL/LTL FIFO/LIFO/FEFO/LEFOKitting/De-kitting KPIsLPN (License Plate Number)

WH Performance ParametersStock Turnover Ratio

Warehouse Cost to Sales Ratio.

Warehouse Cost per unit handled

Occupancy rate of warehouse space23Material Handling EquipmentsManual Semi AutomatedAutomatedFork LiftsTransport UnitsRF TerminalsConveyorPick to LightRF Tags24Transport Units

Tote Box Pallet25Fork Lifts

Manual Stacker

Semi Automated

26Fork lifts in Use

27 Conveyor

28RF Terminals

29RF Tag

30RF Tag

31Warehouse Racks

WAREHOUSING OPERATIONS

33Operations in warehouse

34Inbound OperationsASN / PO / JO / TRTV

Goods Receipt Note GRN

Putaway Generation & Confirmation35Advanced Shipment Notice

What is ASN ?Copy of Purchase OrderJob Order Job to be carried by warehouse to receive materials.Move Order Transfer Order from other warehousesTRTV Order To be Returned To Vendor Reverse LogisticsCross dock , Back-OrdersWhy ASN ?For better planning on receiving more volume and handling time.To reduce TAT Truck turn Around Time

How it is captured ?Details of Orders will be sent by mail, fax or print and same will be entered manually in system for execution.EDI - Downloaded from Order Management system, CRM , VRM GRN gets generated upon ASN confirmation.

36Good Receipt Note - GRNWhat is GRN ?Goods Receipt Note Confirmation of receipt Why GRN ?Acknowledgement for receiving to be given to delivery team, manually.Time and Date of Receiving for performance analysis.Outbound shipments can be better managed.Back order can be reduced

How it is captured ?Copy of ASN will be printed and cross checked with received qty. Then entered manually with discrepancy if any like Shortage/Excess/DamagedSame can be verified and updated using RF terminals.

Putaway gets generated uopn GRN confirmation.37Put-away What is Putaway ?Putaway is an operation which directs the inbound team to place the received goods in locations inside warehouse. Why Putaway ?Putaway guides to place the goods in particular location.Updates the inventory upon confirmation.Inventory serial Numbers get generated for internal tracking purpose .Shelf life of the product will be decided from putaway confirmation date.

How it is confirmed ?Putaway can be confirmed in system or thro RF terminals

Inventory gets updated upon Putaway confirmation.38Put-away Proposal Strategy Fixed LocationsFlexi LocationsNear fixed LocationsAdd to existing stockNext empty LocationBulk storage

39Outbound OperationsSO / JO / MO / RTV

Order Picking

Picking Confirmation

Packing Loading & Despatch40Outbound Operations Order ReleaseWhat is an Order & Order Release?An Outbound instruction to despatch certain amount of item to a Customer/Vendor.Order Relase is an process which suggest the Picking team to pick goods from specific location with fixed quantity. Types of Order ?SO Sales Order , JO Job Order , Move Order Stock TransferRTV Return to Vendor

Order release based on ? Customer Delivery window.Transportation cutoff time.Agreed time lines.What does Order Release Does ?Allocates the stock/quantity for released orders.Generates pickticket

Pick Ticket gets generated upon Order Release.41Unit of Measurement

42Pick list / Ticket GenerationWhat is a Picklist?A list which contains which item to be picked from specific location with required quantity.Types of Pick List ?Loose PickFull PickBulk Pick

Inventory Allocation?Inventory allocation happens based on Stock Removal /Stock Rotation logic.

43Picking TypesBasic Order PickingBatch Picking Orders Grouped in small orders / Consolidated Pick List.Zone Picking Picklist will be generated zone wise and issued to picker.Wave Picking - Combination of Batch & Zone Picking

Stock RotationPicking MethodsFIFO , FEFO , LIFO ,FMFO Partial Quantites / Large Quantites

RF PickPaper Based pickPick to Light

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PackingRF or ManualShippable Pallet not repacked.Grouping product wise.

Loading & DespatchDelivery Documents to be preparedLoading base on route schedule.Loading confirmed by RF or system.

POD Proof of DeliveryPOD on Handheld devicesThro CRM or SRM/VRM

45Warehouse Support Services4546CapabilitiesQC CheckingPallet LabelingConsolidation & Break bulkCross DockingPostponementStock PilingKitting

47QC CheckingReceiving Quantity against order placed.Checking for damages while transportation - DOASample testing.

48Pallet Labeling

49Stock PilingA stockpile is a pile or storage location for bulk materials, forming part of the bulk materials handling process.Stockpiles are used in many different areas, such as in a port, refinery or manufacturing facility. The stockpile is normally created by a stacker. A reclaimer is used to recover the material. Stockpiles are normally stacked in stockyards in refineries, ports and mine sites.A simple stockpile is formed by machinery dumping coal into a pile, either from dump trucks, pushed into heaps with bulldozers or from conveyor booms. 50Kitting is the process of forming kits either for production or for dispatch

A kitting list is prepared for the inventory which are to be used to form a kit

Warehouse personnel forms the kits based on kit listsKitting

51Cross DockingIt is the Process of receiving and dispatching goods across docksStorage of goods is only at the staging area or sometimes even no storageMostly Used for products with shorter shelf life.

52Cross Docking

53PostponingPostponement is a systematic approach to designing and developing standard, configurable products that can be differentiated, quickly and inexpensively, once actual customer demand is known. This model allows organizations to transition from a 'push'-oriented supply chain to a 'pull' or a demand-driven supply chain. Postponement is not a new concept. Holding Inventory in a less finished state that is , postponing final product assembly unit until actual customer demand is knownMarket opportunities and offer greater customization options .High degree of collaboration and visibility across the supply chain.

54Inventory Management5455Inventory ManagementAnalysisVendor Managed Inventory / Consignment Stock Replenishment Cycle count , Stock CountJIT / Kanban

56Inventory AnalysisAnalysis / ClassificationCriteriaUsesA B C AnnualOrd qty decisionV E DCriticalitySafety stock of sparesF S NMovementDisposal DecisionX Y ZStock ValueDisposal Decision , stock verificationAnalysis refers to an assessment of the viability, stability and profitability of a business.To continue or Discontiue its main operation or part of its business.Make or Purchase of certain materials in the manufacture of its product.57Vendor Managed Inventory - VMI

58Consignment Stock - Consignment Inventory is inventory that is in the possession of the customer, but is still owned by the Supplier/Vendor. - Consignment stock is legally owned by one party, but held by another. - Ownership of consignment stock is passed only when the stock is used (issued). Unused stock in a warehouse may be returned to the manufacturer. 59Inventory Accuracy

60Cycle CountWhy to Count ? And Frequency of Counts ?

61Stock Count

Why to Count ? And Frequency of Counts ?

62Replenishment

An Inventory system in which a minimum quantity and maximum quantity are set for an item. When the quantity drops below Min you order up to the Max or to quantity configured.Internal ReplenishmentExternal ReplenishmentReplenishment is the process of filling the picking locations63JIT / KANBANJust In Time is an inventory strategy implemented to improve the return on investment of a business by reducing in-process inventory and its associated costs. The process is driven by a series of signals, which can be Kanban indicator.Quick communication of the consumption of old stock which triggers New stock to be ordered is key to JIT and inventory reduction. This saves warehouse space and costs.

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