Southeast Computers Inventory webinar 10/22/14
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Transcript of Southeast Computers Inventory webinar 10/22/14
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7 Inventory Strategies Towards Be4er Profits
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Who are we?
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Southeast Computer Solutions, a software consulting firm, that has been helping small to medium sized businesses implement warehouse management solutions since 1985. What do we do?
Southeast Computer Solutions offers its clients expert technology consulting advice based on best practices. We listen to you and provide our best thinking solutions to meet your needs. We help clients by performing business analysis & offering our expert consulting advice specializing in Industrial engineering and helping clients design warehouses for maximum efficiency.
Our office located in Miami Lakes, FL
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What our clients want to know…
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• What items to stock? How many? When to order more?
• How do I track in-‐transit inventory and related landed costs?
• How do I maximize space?
• How do I store products to maximize efficiency (and minimize the cost of filling orders)?
• How do I maintain accurate on-‐hand quanEEes?
• How do I track and find my inventory?
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7 Inventory strategies towards be4er profits
• Best pracOces and tools
1. ForecasEng
• Tracking the supply chain
2. Container Tracking
• “They promised my ERP system would handle costs, but it doesn’t? Why does it work for everyone else but me?”
3. Landed Costs
• How can a barcoding soluOon help?
4. Barcoding
• OrganizaOon of the warehouse
5. Inventory Bin Locator Tracking
• Smoothing out the process
6. Order Fulfillment
• Empowering your sales team
7. Mobile Sales
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1. ForecasOng
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Why is forecasEng important?
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For every 1% improvement in forecast accuracy, businesses experience a drop in inventory levels between 1% -‐ 2% Businesses can experience a 17-‐point average improvement in forecast accuracy when adopOng best pracOces and new technology As a result, firms can benefit from a 17% -‐ 34% reducEon in inventory simply by implemenOng a technology to help improve forecast accuracy.
* Source: Triple Point Technology
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CreaEng accurate forecasts.
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• How do you segment your customers? Do you sell domesOcally, or internaOonally? Do you sell to big-‐box retailers, or small mom-‐and-‐pop shops? Do you ship to mulOple markets from various warehouses?
• Are you a wholesale distributor, or a manufacturer, or a combinaEon?
If you are a manufacturer…do you consider yourself a MTS or MTO (Made to Stock vs. Made to Order) business?
• Is your business seasonal?
Do different products have different seasonal trends associated with them?
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ForecasEng: Common threads
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• You have limited warehouse space • You need to pracOce “Just in Time”
inventory, not “Just in Case” • Maximize limited space with the most
profitable and best selling items
• A,B,C ranking for replenishment
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ForecasEng: Common threads
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• Segment your customers • Understand seasonality trends • Rank your items • No system is “perfect”
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CollaboraEve ForecasEng
10 EffecOve Inventory (www.effecOveinventory.com)
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2. Container Tracking
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Purchasing from overseas
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More and more companies are purchasing from overseas. Allows companies to purchase at reduced costs, but companies need to track import controls.
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Container tracking
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• U.S. Customs
• Harmonized Codes
• www.exportcontrols.com
• INCOTERMS
• Bill of Lading
• CIF
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Container tracking
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• Modify PO Lines
• Add fields for: • Container ID • Vessel • ETA • BOL • QuanOty Shipped
• Receive into an “In Transit” Warehouse • Title transfer • Transfer goods from In Transit to Main warehouse
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Container tracking
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3. Landed Costs
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Landed Costs
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How much it cost to get it here? • TransportaOon costs • Insurance charges • DuOes • VAT • Customs assessments • Etc.
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Landed Cost
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www.exportcompliance.com/landed-‐cost-‐calculator.html
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4. Barcoding
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Barcoding
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• Inventory accuracy
• Faster and efficient receiving
• Reduces errors when picking, packing and shipping
• Quick inventory counts
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Barcoding
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5. Inventory Bin Level Tracking
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} Install a flexible material storage system that allows products to be stored to minimize the cost of filling orders
} Label floor areas, aisles, shelving units, shelves
} A bin is any designated storage locaOon ◦ Shelves ◦ Pallet racks ◦ Floor areas
} With a good bin system, a new employee will be producOve on his/her second day of employment
© EIM, Inc.
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Assign and Use Bin LocaEons
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• Fixed LocaOons • Random LocaOons • Holding Bins
Make sure your material handling capabili6es can handle your peak level of ac6vity
© EIM, Inc.
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Three Types of Storage LocaEons
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• Space is reserved for a specific product
• If the item is out of stock, the space remains empty, awaiOng the replenishment shipment
• The “pick face” contains the fixed bin locaOons used to normally store products
• A product can have mulOple fixed bins in a warehouse
© EIM, Inc.
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Fixed Bin LocaEons
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Item #A100
3rd Level2nd Pallet
02 01
04 03
06 05
02 01
04 03
06 05
Aisle 1 Aisle 2 Aisle 3
2nd Level3rd Pallet
1st Level1st Pallet
© EIM, Inc.
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Random Bin LocaEons
What do random bin loca6ons require?
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Random Bins - Surplus
Fixed Bins - Stock
Fixed Bins - Stock
Fixed Bins - Stock
Fixed Bins - Stock
Fixed Bins - Stock
Random Bins - Surplus
Fixed Bins - Stock
Fixed Bins - Stock
Fixed Bins - Stock
Fixed Bins - Stock
Fixed Bins - Stock
Random Bins - Surplus
Fixed Bins - Stock
Fixed Bins - Stock
Fixed Bins - Stock
Fixed Bins - Stock
Fixed Bins - Stock
© EIM, Inc.
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Random Bin LocaEons Used to Store Surplus Stock
• Surplus stock is stored above pick face bins • Use erasable magne6c labels to designate the loca6on of surplus stock
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• Holding bins are used to store material that is not currently available to customers: – InspecOon – Returned Goods – Rework/Repair – Repackaging
© EIM, Inc.
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Holding Bins
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Shipping, Staging and Receiving
Jones Products
Cates Products
Tubing and Brass Fittings
Smith Products
Murphy Products
Plastic Fittings
Chemicals
Clairmont Products
Bryer Products
Wedge Products
© EIM, Inc. 29
TradiEonal Warehouse Layout
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"B" Ranked Items
"A" Ranked Items
Shipping,Staging andReceiving
"D" RankedItems
"C" RankedItems
SurplusandBulk
Storage
DeadStock
© EIM, Inc.
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Rank Based Storage Warehouse
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Shelving Units
Poor Location
Poor Location
Prime Location
Prime Location
Fair Location
Fair Location
• IdenOfy most accessible bins in each storage secOon
• Stock items with highest hits at eye level
© EIM, Inc.
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Bin Locator System
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6. Order Fulfillment
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AccumulaOon of all of the costs involved in maintaining inventory in your facility – Cost of pukng away stock receipts and moving material within the warehouse
– Insurance on inventory – Rent and uOliOes for the porOon of your warehouse used to store material
– Physical inventory and cycle counOng – Inventory shrinkage and obsolescence – Opportunity cost of the money invested in inventory
© EIM, Inc. 34
Carrying Cost (“K” Cost)
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Cost of Filling an Outgoing Order Includes
• Labor associated with filling orders • Cost of shipping supplies • % of the cost of capital improvements to the warehouse
• % of the depreciaOon expense associated with warehouse equipment
• % of warehouse insurance
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© EIM, Inc.
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Calculate the Cost of Filling an Order
• Total warehouse labor • The number of orders shipped during the past 12 months
• The average number of line items on each customer order
• The number of orders that can be filled per hour
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© EIM, Inc.
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Cost of Shipping Supplies
• The annual cost of shipping supplies (boxes, bags, shipping tape, Styrofoam “peanuts”, etc.) is a direct expense for filling orders. The enOre amount is part of part of the cost of filling an order
37 © EIM, Inc.
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Improvements, Equipment, and Insurance • DepreciaOon for warehouse improvements financed equipment and insurance have to be allocated among all warehouse funcOons. We typically use the same percentages derived from analyzing the division of labor.
• 80% of warehouse labor is devoted to filling orders
DescripEon Annual Cost 80% of the Cost
Improvement DepreciaOon
$20,000 $16,000
Insurance $3,700 $2,960
Financed Equip $4,620 $3,696
Total $22,656
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© EIM, Inc.
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Time to Pick an Order
• Acme has five full Ome pickers • There are 10,000 hours available to pick each year: – 8 hours per day * 250 work days * 5 Pickers = 10,000 hours
• Five full Ome order pickers pick the 57,855 orders in the 10,000 hours
• Average amount of Ome to fill an order: – 57,855 Orders ÷ 10,000 Orders = 5.78 Orders/Hour or (10.38 minutes per order)
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© EIM, Inc.
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Time to Pick an Order
• Time in moOon analysis showed that in filling an order: – 2/3 of the Ome is spent pulling material – 1/3 of the Ome is spent packing and staging the order
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© EIM, Inc.
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• QuanOOes on stock receipts “tagged” to specific orders – Ensures that the right customer gets the product
• Backorder availability report – Shows what backorders can be filled from current stock receipts
• Minimizes material handling as orders can be filled on the receiving dock and sent to staging or shipping bypassing the warehouse storage area
© EIM, Inc.
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Cross Dock Whenever Possible
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Order Bin Item Qty to Pick Qty Picked12004 A-02-04-02 41-FS04 ¼” Flare Nuts 100 10012012 A-02-04-02 41-FS04 ¼” Flare Nuts 25 2512004 A-02-04-08 48-F04X04 ¼” x ¼” Male x Flare Connector 200 20012016 A-03-06-06 49-F04X04 Male x Flare 90 Connector 15 15
© EIM, Inc.
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Wave Pick Sheet
• Reduces “dead head” Ome • Pick mulOple orders at one Ome • Appropriate for numerous one and two line orders • Requires that orders be “assembled” during the packing process and
that packing slips be printed in addiOon to pick Ockets
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} Customer orders with mulOple lines are separated based on locaOon of the primary pick locaOon for each item
◦ Appropriate for large warehouses
© EIM, Inc.
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Zone Picking
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• In a full physical all stocked products in a locaOon are counted at one Ome (usually once a year)
• Some problems with a full physical inventory: – Time constraints and customer service (all acOvity must stop during count)
– Counters may not be properly trained and may not have a vested interest in the goodness in the count
– Even if physical is accurate, how long will it remain accurate?
© EIM, Inc.
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Full Physical Inventory vs. Cycle CounEng
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} Cycle counOng is the process of counOng part of your stock inventory, every day
} Cycle counts usually result in more accurate computer stock levels than annual physical inventories
} Without accurate stock levels, effecOve inventory management is impossible
} Goal = 2% to 3% tolerance level
© EIM, Inc.
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Make Cycle CounEng Part of Your Regular Business Procedures
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} Bins/items with a large number of hits are counted more ouen
} Every Ome someone goes to a bin to pull an order is another opportunity for a error or “unquality event” to occur
} These items are more likely to have inaccurate quanOOes and should be counted more ouen.
} Slow moving products usually have great accuracy and therefore can have an extended count cycle
© EIM, Inc.
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Cycle Counts Based on Product Rank
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• Count “A” items six Omes a year • Count “B” items once or twice a year • Count “C”, “D” and “X” items once a year
Best for maintaining accurate stock levels Consider adding high value and frequently pilfered items to the “A” group
© EIM, Inc.
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Cycle Count Rank Based on Hits
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7. Mobile Sales
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Mobile Salesforce