Ops Council – Turns & Inventory

Management

2

Ops Council Charter, cont.

 Turns Management/Slow or Dead Inventory/Forward Buys/Strike Pricing Management 

Desired EffectEnsure the highest and best use of E3 Trim/SAP to maximize turns and price gains and lower inventory investment. MetricMarket GainsTurnInventoryCompany run rate improvement goal - $537,000

TechnologiesE-3 TrimSAP Corporate Chair Operations ChairMike McCarthy Jon Mollman MembersTBD

Inventory Reduction/Turns Management

• Maximizing Price Gains– Monthly Strike Price Increases

- Goal is to have 21-30 days on hand (depending on shelf life - Buyers need to be certain of Vendor price change rules > Is it by Order date, Ship date or Receipt date > Put in notes in E3 so anyone will know

• Monthly Strike Price Decreases– Goal is to have 7 days or less on hand– Ensure Buyer reviews all future open PO’s and adjusts pricing

3

Inventory Reduction/Turns Management

• React immediately upon price change notification - Need to meet Vendor lead times• Utilize relationship where you can

– on late notification, still try to adjust PO’s• Understand which Vendors will push back or notify the Concept

– push the limit, but within reason

4

Turns• A

5

Working Capital

• This is A/P, A/R and Inventory• Cash Flow is generated by the following:• Reduce A/R- we get funds in quicker from our customers• Increase A/P- we hold onto our funds longer by stretching

payments to our vendors• Maximize Inventory Turns - we bring in the minimum amount

needed to service our customers, thereby holding on to capital. This creates value and allows us to use the funds for other business needs.- Just In Time Management of Inventory

6

INVENTORY TURNS

• Inventory turns is simply the number of times we cycle or turn our inventory per year.

• Inventory turns calculation: Divide the annual cost of sales by the average inventory level.

• Example; Cost of Sales $36,000,000 Average Inventory for this time $6,000,000 equates to 6 Inventory Turns

7

Improving Inventory Turns

• What is the benefit of increasing inventory turns?– Financial Impact: less money spent - allocation for

other business needs– Reduced interest charge or carrying costs– Better utilization of Warehouse Capacity– Less chance of loss, damage or theft

8

Basic Questions

• What is the minimum lead time as per the vendor?• What is the reliability of the vendor and/or trucker to

make appointments?• What is the minimal safety stock needed? -

Seasonality is a factor• Are there other items available as a substitute in an

emergency? Can LTL be utilized?• What is the effect on price change income/buy-ins? -

Do not want to sacrifice real $$’s• What is the back up plan if we run O/S? Can we pick

up from a nearby center?9

Potential Hazards• Running out of Stock - affects customers and could

cause additional expense filling orders• Vendor Responsibility - we must hold vendors to

their appointments, but we must also be held accountable for our errors and detention charges

• Requirements to have promotional inventory on hand before the actual start date - SLO’s, toys

• Balance buy-ins, i.e., Coke buy-in at year end - additional cost of carrying inventory versus the additional income generated from the buy-in

10

Interest Expense – High/Low6.5%

Budget 2006 Corp Park MidAtl West Metro Ohio Savage Memphis ChicagoDSO Turn DSO Turn DSO Turn

DecemberJanuary 33,588,723 2,855,635 3,771,469 1,469,004 3,226,186 4,706,626 3,391,602 7,556,650 21.25 17.13 6.09 59.78 10.31 35.31 February 34,723,723 2,857,527 3,778,518 1,516,839 3,259,494 4,705,703 3,391,602 7,765,441 20.94 17.38 6.09 59.79 10.31 35.31 March 36,142,513 2,977,680 3,923,939 1,647,426 2,978,941 4,734,918 3,374,512 7,724,751 20.88 17.43 6.09 59.78 10.31 35.31 April 36,453,367 3,132,925 4,074,025 1,748,763 2,676,823 4,734,312 3,612,267 7,497,426 21.35 17.05 6.09 59.78 10.31 35.31 May 38,636,223 3,467,750 4,351,155 1,905,671 3,044,246 4,815,364 3,612,267 7,845,363 21.13 17.23 6.09 59.79 10.31 35.32 June 38,226,746 3,395,097 4,255,198 1,884,043 3,161,298 4,943,430 3,612,267 7,720,709 20.90 17.41 6.09 59.78 10.31 35.32 July 38,924,770 3,250,918 4,113,038 1,794,155 3,269,621 4,888,509 3,721,577 7,568,244 21.29 17.09 6.09 59.78 10.31 35.31 August 39,323,947 3,322,222 4,258,580 1,795,604 2,993,561 4,887,933 3,655,375 7,562,420 21.21 17.16 6.09 59.78 10.31 35.31 September 38,040,347 3,282,174 4,195,052 1,811,219 3,053,058 4,760,736 3,655,375 6,900,952 21.51 16.92 6.09 59.78 10.31 35.31 October 38,144,583 3,137,273 4,162,096 1,717,534 3,247,027 4,760,119 3,655,225 7,137,600 21.62 16.84 6.09 59.78 10.31 35.32 November 37,333,347 3,145,417 4,162,227 1,741,556 3,460,517 4,702,284 3,655,225 7,461,599 21.37 17.03 6.09 59.78 10.31 35.32 December 35,990,927 3,145,416 4,142,250 1,741,556 3,419,306 4,701,971 3,812,514 7,461,601 21.31 17.08 6.09 59.78 10.31 35.32

Actual 2006

December 37,065,606 4,834,796 5,086,260 1,981,958 3,966,218 5,397,582 3,979,857 8,647,089 January 35,648,618 3,557,018 3,995,205 1,874,523 3,045,551 5,187,520 3,717,550 8,967,244 21.53 16.91 7.64 47.64 11.16 32.62 February 36,429,433 3,318,542 4,048,103 1,589,141 3,168,316 4,901,682 3,563,371 8,255,885 21.46 16.96 6.88 52.94 10.99 33.13 March 36,450,162 3,544,148 4,332,699 1,644,494 2,976,668 5,178,757 3,563,413 9,022,353 21.15 17.21 7.48 48.67 12.08 30.13 April 36,776,168 3,207,843 4,521,198 1,594,539 2,899,598 5,048,260 3,207,632 8,951,015 21.90 16.62 6.58 55.31 12.17 29.91 May 42,023,966 3,606,430 4,246,113 1,929,198 3,286,406 5,416,851 3,328,619 10,273,950 24.13 15.09 7.27 50.05 11.30 32.22 June 37,665,312 3,544,835 4,630,711 1,637,462 3,260,155 5,108,097 3,707,244 8,620,027 21.85 16.66 7.49 48.61 12.49 29.15 July 35,501,830 3,104,655 3,863,823 1,707,968 2,986,602 5,298,190 3,970,661 7,992,741 20.92 17.40 7.85 46.37 9.92 36.70 August 36,524,349 2,691,342 4,134,566 1,765,247 2,927,249 4,784,638 3,539,829 7,171,254 19.04 19.12 6.13 59.38 10.26 35.49 September 38,453,029 3,029,552 4,589,241 1,595,604 3,400,498 4,946,540 3,930,813 7,074,025 22.81 15.96 6.81 53.48 11.71 31.07 October 36,212,853 3,383,675 4,291,142 1,466,103 3,284,398 4,914,064 3,499,495 7,923,221 20.88 17.43 6.97 52.24 10.44 34.85 November 36,469,687 3,160,306 4,239,976 2,170,603 3,139,259 4,882,230 3,587,107 7,695,889 21.52 16.91 5.99 60.74 10.17 35.80 December #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!

Corp Pk MidAtl West

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High/Low Expense

• Example October: $1,466,103 @6.5% is $7,330 (.065/364*28)

• Example November: $2,170,603 @ 6.5% is $10,853 (.065/364*28)

• Additional cost of $3,523 or .0156 cents/case

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HIGH/LOW FACTORS

• Single Concept- less SKU’s, BKC 430 items- mostly TL, but some LTL- we have worked with RSI to get approval for more LTL’s due to less stores and usage

• Multi- Concept- more SKU’s, possibility of duplication of items

• Customer Needs- Westborough- forced to bring in containers from Italy for Bertuccis, no viable alternative.

13

Inventory Levels Report

Maines Paper & Food Service, Inc.Inventory Levels

June JulyLocation Dec-05 Jun-06 Excess Inv Jul-06 Excess Inv Aug-06 3-Sep-06 10-Sep-06 17-Sep-06 23-Sep-06

Corporate Park 37,065,606 37,665,312 1,481,154 30,828,420 1,300,788 30,528,003 31,444,151 29,988,640 31,301,792 32,103,874Alice Street 5,150,449 5,996,346 5,624,561 5,126,986 5,423,554 5,810,640Total Corporate 37,065,606 37,665,312 1,481,154 35,978,869 1,300,788 36,524,349 37,068,712 35,115,626 36,725,345 37,914,514

Johnson City Ledger 692,909 814,819 814,819 905,306 905,306 905,306 905,306 905,306Syracuse Ledger 424,517 400,307 400,307 436,895 436,895 436,895 436,895 436,895

Mid-Atlantic 4,834,796 3,544,835 - 3,104,655 210,287 2,691,342 3,234,339 2,989,806 3,403,701 2,976,804New England 5,086,260 4,630,711 42,166 3,865,782 43,954 4,134,566 4,675,477 4,232,285 4,562,372 4,643,432NY-Metro 1,981,958 1,637,462 638 1,708,710 963 1,765,247 2,126,996 1,630,653 1,952,542 1,855,227Ohio 3,966,218 3,260,155 6,251 2,986,602 6,444 2,927,249 3,247,802 3,312,124 3,135,496 3,156,260

Maryland 5,397,582 5,108,097 43,399 5,298,190 33,237 4,784,638 5,157,681 4,949,091 5,129,735 5,000,237Memphis 3,979,857 3,707,244 17,038 3,970,661 16,539 3,539,829 3,743,940 3,429,354 3,406,154 3,133,575Chicago 8,647,089 8,620,027 78,033 8,010,482 48,267 7,171,254 7,564,606 7,439,831 7,408,812 7,287,732Total MPFS 72,076,793 69,388,968 1,668,678 66,139,077 1,660,479 64,880,676 68,161,755 64,440,972 67,066,359 67,309,982

Change (8,200)

W/E 9/23/06Inv Turns Fcst Vrce toBudget Inventory FcstSep-06 Sep-06 Sep-06

Corporate Park 16.92 37,042,075 (872,439)Alice StreetJohnson CitySyracuse

Mid-Atlantic 59.78 2,684,370 (292,433)New England 35.31 4,057,135 (586,297)NY-Metro 42.55 1,935,508 80,281Ohio 50.73 2,848,137 (308,123)

Maryland 39.89 4,700,045 (300,192)Memphis 44.88 3,301,493 167,918Chicago 27.96 6,891,623 (396,108) 14

Tools Needed to Improve Turns

• Usage Report

• Landed Cost Report - work with RSI to obtain LTL rates rather than T/L pricing

• Excel Worksheet

15

Metro Turn Performance

-

10

20

30

40

50

60

Jan Feb mar Apr May Jun Jul Aug Sept Oct Nov

Inventory Turns 2006

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Inventory Management

• Printing the Stock Status Report: • H&S Option 5 – Purchase Order Menu – enter• Option 9 – Purchase Report Option – enter• Select the Stock Status – Whs/ Buyer/Item• Select for W - Weekly

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Stock Status Report PO09A1

1/05/07 10:13:51 JJTRIOLA CMP/DIV/LOC 12 1 1 WHS- 1 BUYER- 70 BEVERLY BLACK STOCK STATUS

WEEK/ THIS 1WK 2WK 3WK 4WK

CSQTY ALLQT NETQT MINBL AVERAG WEEK AGO AGO AGO AGO PACK SIZE UPC/VND_ITM ITEM_DESCRIPTION___________TIHI_ _AVERAG _MARKE 1 1050 675258056057CARTON MULTI FS 24.79 25.8200 25.620 228 29 615 308 154.0 107 139 184 153

165 17182 B/KING 408 25.8200 26.480 1 500 CT 675258056044CARTON BREAKFAST FS 13.93 19.1300 18.880 106 6 140 60 30.2 21 18 29 37

35 5898 B/KING 805 19.1300 19.570 1 250 CT 675258056064CARTON 2 CUP CARRIER FS 19.00 11.9100 11.750 129 49 656 457 228.3 148 222 257 223

227 4768 B/KING 808 11.9100 12.180 1 500 CT CTN FRY ROUND KING 10.42 17.1400 17.310 105 21 372 170 85.1 56 91 93 75

90 17591 B/KING 612 17.1400 17.690 241 57 940 541 270.3 176 248 343 265

269 1 2000 CT CTN FRY ROUND MEDIUM 27.99 40.9600 41.440 17590 B/KING 607 40.9600 42.300 138 26 472 240 120.0 68 114 138 114

129 1 1200 CT CTN FRY ROUND LARGE 23.22 34.0200 34.440 17573 B/KING 508 34.0200 35.130 1 600 CT CTN CHKN FRIES LARGE NEW 22.78 38.6800 38.910 110 26 348 202 101.0 75 92 122 88

109 17840 B/KING 411 38.6800 39.540

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Excel Spreadsheet» POTATOES 901188 F-05-1A

PLF’s Percent of • ON HAND RECEIVINGON HAND SALES 48/PAL freezer capacity• 12/11/06 1829 1152 2981 1503 62.10 12.40 • 12/12/06 1478 1152 2630 968 54.79 10.94 • 12/13/06 1662 1152 2814 1289 58.63 11.70 • 12/14/06 1525 1152 2677 1654 55.77 11.13 • 12/15/06 1023 2304 3327 1337 69.31 13.83 • 12/16/06 1990 1152 3142 1642 65.46 13.07 • 12/18/06 1500 1152 2652 1503 55.25 11.03 • 12/19/06 1149 1152 2301 968 47.94 9.57 • 12/20/06 1333 1152 2485 1289 51.77 10.33 • 12/21/06 1196 2304 3500 1654 72.92 14.55 • 12/22/06 1846 1152 2998 1337 62.46 12.47 • 12/23/06 1661 2304 3965 1642 82.60 16.49 • 12/25/06 2323 0 2323 1503 48.40 9.66 • 12/26/06 820 1152 1972 968 41.08 8.20 • 12/27/06 1004 1152 2156 1289 44.92 8.97 • 12/28/06 867 1152 2019 1654 42.06 8.40 • 12/29/06 365 1152 1517 1337 31.60 6.31 • 12/30/06 180 1152 1332 1642 27.75 5.54 • 01/01/07 (310) 0 (310) 1503 (6.46) (1.29)• 01/02/07 (1813) 0 (1813) 968 (37.77) (7.54)• 01/03/07 (2781) 0 (2781) 1289 (57.94) (11.56)• 01/04/07 (4070) 0 (4070) 1654 (84.79) (16.92)• 01/05/07 (5724) 0 (5724) 1337 (119.25) (23.80)• 01/06/07 (7061) 0 (7061) 1642 (147.10) (29.36)

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E3 Trim

20

Objectives

Maximize profits / margins Minimal inventory levels Zero out of stocks Minimum exposure to loss Maximize E3 ordering

21

Organization

Use a day planner or desk calendar• Prioritize Keep folders and bins for promotional items Have a daily routine and stick to it Set up folders in outlook Get email addresses for vendors & back up for out

of office Update vendor survey regularly

22

Purchase Order Process

Holding bin or book for orders not yet confirmedConfirmations Files by date {1-31}Changes to date or quantityPrice changes- contracts

23

24

Work Together

w o rk in g as a tea m re a lly m a ke s a d iffe re n ce

R e ce iv inga p po in tm en ts

C u s to m er se rv icep ro m o tio ns

T ra nsp o rta tionb a ckh a u ls

P u rcha s ingIn ven to ry con tro l

Team Work Produces:

• Inventory control – timely adjustments, correct inventory• Receiving - timely receiving, orders here on correct date• Customer Service – some customers wont participate in

promos, auto shipments effect sales- prevents obsolete inventory

• Trans. – product here for shipping from backhauls, money saved by picking up

25

Reports and Tools

SIAR - sales inventory analysis reportItems below minItems on order by item typeBack in stockPerishable items logManual order worksheet

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5/18/07 5:49:17 MAINES Paper & Food Service, Inc. MESIR1D Report # DWEND Sales Item Inventory Analysis ReportWENDYS UNITS  4 4 3 Days R=ReceivedItem # Description Label Week Weeks Weeks Last This Weekly B.O.H. on D=Due Usage Ago Ago Week Week Demand Hand P/O # Cases Date 930447 POTATO BAKER WRAPPED 80 CT PACKER 5212 1391 1390 1373 1058 1303 137 1 226656 D 320 5/18/07 POTENTIAL PROBLEM 846- P/O DUE  930824 DRESS ITALIAN VINAIG WENDYS 303 105 110 81 7 76 7 1 225173 R 60 4/13/07 POTENTIAL PROBLEM 69-930020 BEEF PATTY 8/1 RED 2OZ GRND WENDYS 6081 1708 1625 1533 1215 1520 277 1 226458 D 300 5/18/07 POTENTIAL PROBLEM 943- P/O DUE P/O DUE 226459 D 200 5/19/07 P/O DUE 226625 D 300 5/21/07 P/O DUE 226626 D 300 5/22/07

SIAR Report

27

Items Below Minimum

PO09G1 DARDEN DIRECT DISTRIBUTION, INC.5/21/07 5:19:36 ITEMS BELOW MINIMUM PAGE 1CMP/DIV/LOC 32 1 1 WHS- 1BUYER- 90 JENNY HABURA PACK SIZE ITEM_DESCRIPTION_ ACTUAL MARKET CSQTY ALLQT WTD 1WK 2WK 3WK 4WK 5WK NEXT PO/QTY ITEM_# 6 88 OZ ARTICHOKES QUARTERED 40.30 40.30 6 1 1 2 3 4 1 4 5/25/07 4 944030 1035 OZ RICE CARNAROLI 24.10 24.10 30 10 8 48 66 59 54 42 5/25/07 140 943567 VENDOR # VENDOR NAME VENDOR PH/FAX 115455 AMERICAN ROLAND 212-741-8290

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Perishable Items Ordering

• Check the perishable items report that inventory control emails daily for any issues with rotation and dates

• Run Items on order report for today’s sales quantities

• Record sales on manual order worksheet and decide what is needed

• Place purchase orders manually or thru E3

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Maines # Description Required DatesQuality

Slot # Date(s) of Product Count H&S Diff

930097 Chicken 8 pc BIC FreshMust be received w/12 days.

Store must get 7 days.10-000A 41cs- 5/21/07; 38cs- 5/22/07 79 79 0

930019 Beef Patty 4 oz, 4/10#Must be received w/8 days Stores must have 4 days

10-007A 700cs- 5/16/07 547cs 5/17/07 1247 1251 -4

930020 Beef patty 2 oz, 4/10#Must be received w/8 days Stores must have 4 days

10-015A 104cs- 5/16/07; 500cs- 5/17/07 604 604 0

930131 Frosty Mix, 1/5 galMust be received w/14 days Stores must have 5 days

10-021A208cs- 5/19/07; 400cs- 5/21/07; 900cs-

5/22/071508 1511 -3

930927 Frosty Mix Vanilla, 1/5 galMust be received w/14 days Stores must have 5 days

88cs- 5/19/07; 450cs- 5/21/07; 800cs- 5/22/07

1338 1333 5

Perishable Items Log

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Manual Order Sheet

DATE

: 14-May   15-May   16-May   17-May   18-May  

  18-May  

Item #  Monday   Tues   Wed   Thurs   Friday   Sun  

                       

Moyer            OH930019            Due n4oz beef            Sold

             Bal  >                      

             OH930020              

2oz beef            Sold

 

652       

Sat p.u

800 700 1300 700 700 800

815 726 850 965 1055 715

637 611 1061 796

441

526 

195         

200 300 400 300 300 200

270 218 274 346 398 268 

125 

207 

333 

287 

189 

121 Bal

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E3 Ordering

Best Practice: E3 is our system for calculating orders using several factors such as

Sales, safety stock and vendor requirements

• If the information is correct the orders will be correct• Safety stocks – depends on customers needs, warehouse space

and sales fluctuations• Clear out exceptions every Monday - * this is key to catch

increases or decreases in sales. • Use the notes function for increases and decreases to items

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Workstation ID QPADEV022L 11 Orders Placed

Orders Items

a 0 Short Shipments n 475 Exceptions

b 0 Overdue

c 0 Alternate Source

d 7 Due q 30 Overstock

e 0 Forward r 9 Out of Stock

f 0 Planned s 0 Lost Sales

g 0 Booked

h 0 Transfer u 63 Uninitialized Items

i 0 Back Orders

j 0 Order Point 'A'

k 0 Order Point

l 0 Buyer Order Point y Kit To Do Menu

m 105 All Orders z Utility Menu

E3 Main Menu

33

E3 Maintenance

• Keep up to date with adding items and vendors to the E3 system

• Supercede items-old to new• Order Policy Analysis

34

Other Key Processes

• Item maintenance (subs, deals) • Clean up : obsolete items/old open pos • Sometimes order less more often • Weekly and monthly price changes

35

Questions?

Call either of us, we would be glad to help

Darlene Passarelli: 301.543.1104Jenny Habura: 630.295.5134

36

Features and Benefits of Using E3

July 1st 2009

37

In my opinion, E3 is the best tool Maines has given the purchasing department:

• To efficiently place orders quickly and accurately• To maximize on all deals and price increases• To identify fast or slow trending items• To manage our inventory• To service our customers at the high levels that they

have come to expect from Maines.

38

• E3 is designed to enable distributors to more profitably anticipate and satisfy customer product demand.

• Features of E3 most commonly used at Maines include:– History exception program– New item information– Seasonal forecasting functions– Deal program– Superceding functions– Reserve item functions– Ti Hi ordering functions

39

• E3 Success comes from a strong set up of both vendors and items.

• 70% of using the system successfully is in accurate vendor set up.

40

• Service Level goal• Lead time quoted from vendor• Lead time forecasted in days• Lead time variance %• Buying bracket(s)

- can be set by dollars, cases, weight, cube or pallets and if there are multiple brackets available, the discounts can be added and the system will calculate which bracket is the most profitable

Vendor Setup Includes:

41

Setting the buyer class:1. R for stock items2. M for special orders3. D discontinued

Item Setup Includes:

42

• Reviewing history on demand forecasting screen. – New items (uninitialized) need to have a

starting forecast. – History on an item can be filtered or adjusted

to account for promotional activities, opening orders, etc.

– Determine if the item is seasonal. If so a seasonal profile can either be created or copied from a similar item

43

• Decide if the item history should be reviewed weekly or every 4 weeks. – Almost all of our items are set up to review weekly,

split cases are set up to review every 4 weeks.• Setup item minimum order information.

– This allows us to have E3 automatically order the product in our warehouse Ti/Hi quantities as well as set a minimum purchase. For example, we sell 100 cases of an item per week. The pallet holds 10 cases, we would set this item up to order a buying multiple of 10 with a minimum quantity of 100.

44

Once every item in the vendor is reviewed and properly set up, an Order Policy Analysis is run.

• If there are multiple brackets set up, E3 will determine the most profitable bracket.

• Once this is accepted, we are ready to place an order with the supplier.

45

An Order Policy Analysis needs to be run:

• Each time a new vendor is set up• Any time there is a significant change in business

with the vendor (adding or losing volume or items)

• At least once every 6 months • When inheriting a vendor from another buyer

46

Replenishment Buying

Vendor Setup = 70% of successHistory Exceptions = 20% of success

Other Maintenance = 10% of success

47

Replenishment Buying Flow is

• Vendor Setup > History Exceptions > Deals = Correct Suggested Order Quantity

• If this is followed, the suggested order quantity is always mathematically correct.

48

Replenishment Buying is the end result of

• Demand forecasting• Lead time forecasting• Order policy analysis• Service level management

49

Demand Equals

Shipped + Lost Sales – Promotional Sales

50

Demand Forecasting Patterns

• Smooth = less safety stock, low MADP• Erratic = higher safety stock, higher MADP• Trending = keeping up with current trends• Seasonal = Predictable, repetitive peaks of demand

MADP = Mean Absolute Deviation expressed as a percentage … In other words how much does an item deviate from the forecast.

Ranges are:• 0-25% stable• 26-49% moderate• 50% and up erratic

51

Demand Forecasting

• Each item has it’s own unique calculation• You can limit the amount of history used

to forecast an item

52

Demand Forecasting has 3 Components

1. Demand Forecast2. Item Deviation3. Seasonal Profile (if applicable)

53

History Exceptions … Concept is to manage by exception

• History exceptions are shown every Monday morning, based on the previous week’s sales

• Items show up based on preset company control factors, these are the settings we use:

5% Demand Filter High 3% Demand Filter Low 35% Tracking Signal Limit

54

Exception Screen• Demand Filter High • Demand Filter Low • Tracking Signal High • Tracking Signal Low • Service Level Check • Infinity Check • Watch Items • Seasonal Items • New Items

55

It is important to remember that when reviewing history exceptions, you do not need to make a change, the system has already done that.

It is simply showing you the items that are exceptions and since you may know something the system doesn’t about the item, it allows you to correct the forecast.

56

Lead Time Forecasting

• Can be set at the vendor level • Can also be set at the item level … item level information

will always override the information at the vendor level• It is important that this information is accurate since as

much weight is placed on lead time as on demand when calculating the suggested order quantity

• Lead time and lead time deviation will impact when you buy as well as safety stock so it is important to keep it accurate.

57

Order Policy Analysis

• This balances the cost to buy with the cost to carry

• Every vendor will have a most profitable order frequency

• Once established, this is the order cycle• However, Every vendor is checked every night and

the order will come “due” on need, Not based on days since bought

58

Service Level Management

Service levels drive safety stock needs, item by item

3 types of items1. Stable2. Lumpy3. Super Lumpy

– Some items can be corrected with seasonal forecasts (like ice melt or charcoal).

59

Service Level Management

• Higher service goals will drive safety stock and inventory levels higher

• Our system default is 97%

60

Key Components of Safety Stock

• Demand forecast• Lead time • Lead time variance• Order Cycle• Service level• MADP

61

If all the information up to this point is correct …

Then daily buying simply becomes replenishment,

not buying

62

Daily Replenishment Buying• An order becomes due when enough items get at or below

the item order point resulting in service jeopardy for the vendor line.

• Every item is analyzed every night• An order is built for each vendor each night (even non-due

orders)• Items reaching their order point ahead of the rest of the line

will prompt as Order Point Checks• Due orders MUST be bought daily• Suggested order quantities should not be changed,

component information should be fixed instead

63

Daily Buying .. How To• Sign on to the E3 To Do Menu• Set Data Base Selector to Buyer ID# and

Warehouse (company) #• Use easy to navigate work flow starting at the top

left corner “Due Orders”.

The left side of the screen are the Order Categories

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E3TRIM To Do Menu Company E3T MAINES PAPER AND FOOD SERVICE Buyer 010 211814 Orders Due in Dollars Warehouse 001 6185 Orders Placed in $'s Workstation ID QPADEV0257 1 Orders Placed Orders Items a 0 Short Shipments n 1858 Exceptions b 0 Overdue c 0 Alternate Source d 19 Due q 118 Overstock e 1 Forward r 65 Out of Stock f 0 Planned s 0 Lost Sales g 0 Booked h 0 Transfer u 0 Uninitialized Items i 2 Back Orders j 2 Order Point 'A' k 11 Order Point l 0 Buyer Order Point y Kit To Do m 88 All Orders z Utility Menu

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Select D Option to see the Orders that should be placed today

Buyer 040 Due Orders Warehouse 001

Vendor Sb Vendor Name Wg Whs St Amount Del a 206875 DAYMARK 001 1 3595 3 b 231600 02 DURO BAG 001 1 7648 0 c 378000 JET PLASTICA 001 1 8259 0 d 630760 01 PRAIRIE 001 1 93540 0 e 721500 1 SOLO STOCK 001 1 3335 5

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Select the first vendor on the list Display Work Calculator DR0B 2009 05/21 Order Detail 09:49:38 Buyer 040 3 Delay Vendor 206875 DAYMARK Warehouse 001 2009 05/14 Last Order Date Independent Auto Adj Final Adj Totals Bracket 3,596 3,596 3,596 Dollars 1 1 511 511 511 Eaches 2 0 Maximum 300 300 300 Weight 3 1,000 Minimum 31 31 31 Cube 4 0 Up to Max 43 43 43 Dozen 5 1 Unit 79 79 79 Cases 6 .000 Discount % 82 82 82 Layer 7 0 Bkt Pricing Opt 43 43 43 Pallets 8 0 Discount Pass On 511 511 511 Gallons 9 0 Savings Per Order Checks 0 Savings Pass On a 2 AOP d 33 MANL b 2 OP c 16 NEW

5 Rebuild 6 Accept 7 Prt PO 8 All Itms 9 SOQ Itms 10 Clr Ord 23 Trk Spl

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There are 3 levels of an OrderOrder Detail Screen shows:• Viewing options• Rebuild options• Order accept key

Item Summary Screen shows:• Items and suggested order quantities• Helpful codes such as N or W• This is where any manual special order items will be added to the order.(browse when needed, buyers do look at this screen prior to accepting an order)

Item Detail Screen shows:• Full details of how the system got the suggested order quantity(should only be viewed when needed and if all set up is correct that should be rarely)

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You can accept the order as is or review all items on the order

• Once you are comfortable with the order, go back to the Order detail screen and accept the order.

• Order approval screen allows you to set pick-up information

• Each due order is handled the same way until the list is completed

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Next StepOrders a 0 Short Shipments b 0 Overdue c 0 Alternate Source d 6 Due e 0 Forward f 0 Planned g 0 Booked h 0 Transfer i 0 Back Orders j 4 Order Point 'A' k 3 Order Point l 0 Buyer Order Point m 79 All Orders

• “A” order point items are items with service level above 98%

• J and K items are below their respective order points but the vendor line has not yet met the vendor order point … this is a quick way to see items you may run out of that can be added to an open order and that might have a jump in sales during the week

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Additional E3 Features• Deals and Forward Buy Functions• Promotional Functions• Superceding Functions• Super and Sub Vendor• Set days of the week ordering• Set weeks of the year ordering

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Deals and Forward Buy Functions

• Setting up a Deal allows us to maximize any additional discounts a vendor offers

• It also allows us to buy-in on a price increase or when a vendor gives us extended terms

• Our system is set up to cap the buy at 42 days and it will place the order as late as possible.

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Promotional Functions• This allows us to key in expected demand during a

promotional period and have the system order the product based on the extra demand.

• E3 will also filter the added demand out of the forecast so not to increase inventory after the promotion.

• This does not work well for long promotions, since it buys all the increased demand at one time– It is better to manually increase the forecast for long

promotions and then adjust the promotional use out at the end.

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Superceding Functions

• Superceding is a way to easily transfer item demand from one item to another.– For example, if a customer changes their

specifications from 1 item or supplier to another, we can transfer the history from the original item over to the new item.

– There is also a calculator in the program that allows for case pack differences.

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Super and Sub VendorsDot Foods is a good example of a Super Vendor• We order many different vendors on 1 purchase order

from the created “super” vendor.• By creating this link in E3 it allows us to track our

purchases by the individual vendor as well as maintain item information at the vendor level in the AS400 side of our system.

Some suppliers have multiple shipping warehouses. • These suppliers are set up in E3 as Sub Vendors.• This allows us to separate items according to the shipping

locations and place individual orders by location.

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Set Days of the Week Ordering• E3 allows you to set the day of the week that a vendor shows up as a

due order– This function is helpful for suppliers that are either backhauled or

have set pick-up days with our logistic carriers– It is also helpful for vendors where we have set ordering days of the

week, like DOT.– Each of these types of orders need to be reviewed since E3 will

build an order for that day of the week whether you need to place it or not.

– This function should not be used unless it is absolutely necessary to place an order on a certain day of the week. It can lead to additional inventory. (we once had a buyer here who had 50 vendors so he set up his data base to order 10 vendors a day)

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Set Weeks of the Year Ordering

• Not commonly used but helpful if there is a vendor that can only be picked up every other week

• Can set for even or odd weeks of the year• Normally is set up in addition to set day of

the week option

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E3 Reports

Forecasting Accuracy Report

This is the report we use:• Offers an overall report card of the accuracy of

last period’s demand forecast.• It displays expected demand versus actual

demand during the most recent period.• The report shows the actual sales dollars

achieved vs. the sales dollars expected based on forecast and a ration between actual and expected.

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• It does not take into account any changes we have manually made in the demand forecast – For example to gear up for a new customer or gear

down for loss of an account• It can be run by buyer and for the company as a whole• It should be run each week and then totaled by the

month to get a clearer picture of how each buyer is doing• The ideal number is 100% the normal range is 90-95 or

105-110%.– If the differences that are larger than forecast should

be analyzed.

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This is basically the only report we have used and is the best tool to determine if the buyer is keeping up with history exceptions and their item demands, which is the most important maintenance for accurate E3 ordering.

This is a sample of the report and recap of the forecasting accuracy report information I have kept in the past

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99.8110152822.3310472710.009874Aug Co 1

96.762097425.002167508.00474Julie DepratoAugust

90.49334780.00370054.00863Cheryl AshtonAugust

104.326586.0025465.0024Scott LeveilleAugust

91.23065601.003363285.00581Brenda HullAugust

108.13681212.00630524.33804Jack LoomisAugust

103.27293381.00284169.67943Matt DeaneAugust

96.29678134.67703250.001361Becky RobergeAugust

104.11790239.007591590.001167Jeff DietrickAugust

106.98609288.33569604.001171Deb SpiritoAugust

94.1675580.00718499.671214Denise BarryAugust

102.19900595.33881193.331271Jim PopeAugust

% of Expected Demand

Actual Demand in $

Forecasted Demand in $

Total Item CountBuyerDate

99.8110152822.3310472710.009874Aug Co 1

96.762097425.002167508.00474Julie DepratoAugust

90.49334780.00370054.00863Cheryl AshtonAugust

104.326586.0025465.0024Scott LeveilleAugust

91.23065601.003363285.00581Brenda HullAugust

108.13681212.00630524.33804Jack LoomisAugust

103.27293381.00284169.67943Matt DeaneAugust

96.29678134.67703250.001361Becky RobergeAugust

104.11790239.007591590.001167Jeff DietrickAugust

106.98609288.33569604.001171Deb SpiritoAugust

94.1675580.00718499.671214Denise BarryAugust

102.19900595.33881193.331271Jim PopeAugust

% of Expected Demand

Actual Demand in $

Forecasted Demand in $

Total Item CountBuyerDate

Other Reports Available Include:

• Lost sales analysis current and previous period– Ranks items by lost dollars with biggest problems at the top– These are potential lost sales based on the current forecast, not actual AS400 lost

sales• On hand overstock current and previous period• Inventory accuracy current and previous period

– Valuable when determining the inventory impact of varying service levels using theoretical inventory values and %.

• Service accuracy– Displays one column for every service level goal set and what was attained by system

class• SOQ vs actual purchase quantity

– This is a daily report that would need to be run by buyer which shows any item that the buyer changed the E3 suggested order quantity. The most recent E3 upgrade also shows this information on the buyer order detail screen

• Service level analysis– System calculated in stock % that would be most desirable

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Best Practice Documents

• etc

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