What is an Inventory Policy?

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improve inventory management, inventory policy, what is inventory policy

Inventory Policy

An inventory policy is a standard set of rules/boundaries and guidelines that provide the framework for an organisation to make better informed and timely decisions on which stock to purchase or manufacture, how much stock to purchase or manufacture and where to store and distribute to customers.

In the absence of any product knowledge or planning parameters such as leadtime, safety stocks, etc an inventory policy must be applied and monitored regularly against future demand. By measuring the variability between forecast demand and historical  sales data by month, businesses will then be able to implement the right planning parameter settings and improve their level investment in inventory.

Several stocking policies can be implemented to improve inventory management performance, these being: Reorder point; Min/Max; lot for lot; days of supply and item location. Each of these inventory policies is reliant on most if not all of the following components for an effective inventory policy:

• ABC Classification
• Safety stock levels
• The level of inventory at stocking points or locations
• Number of warehouses or nodes
• Number of stocking points or nodes
• Order qty and order frequency
• Replenishment qty and replenishment frequency
• Lead time from suppliers
• Stock obsolescence
• Slow moving stock
• Inventory Procedures

Which inventory method is best for my business?

Reorder Point - Fixed Replenishment point or fixed replenishment quantity is used when the stock falls below a certain point which then triggers an order release.

Min / Max is used when stock falls to or below the minimum stock levels which triggers a replenishment or reorder qty equal to the maximum level. Carton rounding can apply with the reorder qty to make the warehouse operation more efficient with handling.

Lot for Lot or demand flow generates a new replenishment order for the same qty at the time the previous order arrives to your facility or operation.

Days of Supply (Historical demand based) is similar to the min / max above, however this method relies on average daily sales using historical demand to calculate an order qty for a number of days supply.

Days of Supply (Forecast demand based) is similar to min / max above, however this method relies on average daily sales using forecast demand to calculate an order qty for a number of days supply.

Item location which is based on the multi echelon optimisation approach that incorporates greater emphasis on all elements of the entire end to end supply chain where there is variability in demand, projections or service.

Developing the right inventory strategy and implementing effective inventory management processes are critical in driving the highest service levels to your customers.

For more information, visit http://www.turnkeysolutions.net.au/inventory-policy.html

A Turn Key Solution supply chain and logistics consultants

Warehouse Assessment

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improve warehouse performance, Reduce warehouse costs, warehouse audit, warehousing

A poorly designed warehouse can be typically constrained by the type of building you occcupy. The column positions that support the structure and the height of the roof can create an inefficient environment that simply decreases warehouse productivity and increases the total cost of your warehouse function.

Selecting the right storage solutions to support your inventory storage and movement profile needs to be considered carefully as implementing the wrong solution will certainly impact on the warehouses ability to store, locate and move stock. By selecting the right storage solutions, supported by the right materials handling equipment, your warehouse will be able to utilise both floor space and elevated cubic storage space more effectively which will lead to greater productivity levels for the warehouse.

An efficient warehouse must also have the right warehouse resource structure in place which has the ability to respond to seasonal demand and challenging delivery windows at the right cost for your business. This flexibility is supported by standard operating procedures for all personnel in conjunction with a sound warehouse management system that directs resources on the most effiient replenishment and pick paths throughout the warehouse layout.

Our warehouse assessment focuses on identifying and improving the daily operation of the warehouse function, its resources, processes, procedures, systems, equipment and inventory.

http://www.turnkeysolutions.net.au/Warehouse-Assessment.html

erp assessment

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erp assessment, erp performance, improve your erp system

Our ERP assessment is designed to provide our clients with an understanding of the real issues that are currently being experienced by your organisation which are hindering your overall system performance and making the initial ROI more difficult to achieve.

As business continues in this type of challenging environment, some individuals are proven to be quite industrious and create work arounds and new processes that are performed outside of the ERP platform, which only add additional cost to your organisation and more complexity which impacts on data integrity and your overall supply chain performance.

As most organisations have already incurred a considerable level of investment on the underperforming ERP system, our assessment is primarily focused on identifying improvement opportunities which are typically self funding

Find out more about: http://www.turnkeysolutions.net.au/ERP-Assessment.html

improve your erp performance

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erp settings, erp systems, improve erp performance, improve erp roi

We work with you to implement solutions that will optimise your demand management, inventory management and warehouse management systems giving you greater control of your costs and improving visibility of your supply chain. Our knowledge and understanding of ERP systems has been attained over a number of years while working with several enterprise systems, these include but are not limited to: JD Edwards, Manugistics, MFG Pro, BPCS, Movex, Infopath, Fact & Microsoft Great Plains.

how to improve your ERP system with optimisation

We adopt a proven process methodology that will enhance the operation of your ERP system and deliver the improvements that were initially anticipated by your organisation. This involves a structured process that covers the following core areas of your system.

item master (Imast) A full review of the item master file to ensure that fields are populated with the correct settings that will enable further improvement. ?Typical fields include: Item, description, UOM, Lot, serial, weight, master schedule, planned orders, time fence, order policy, order qty, safety stock, safety time, ROP, leadtime, issue policy etc.

bill of materials (BOM) A review of the existing structure for a product to its lowest level evaluating the structures integrity, conversion rates per level, unit cost, link to a cost centre, link integrity to item master, routing integrity and a full cost roll-up. ?The linkage between the BOM with Item master and work centres is critical and needs to 100% accurate.

work centres & routings Ensure that an operation is reflected in a work centre, the type of machine used in the set up, hours for the set up, run time for production of an item or component, the run rate per hour and the yield which is another term for efficiency, the labour size for the total work centre, labour rate per hour and cost centres with variance accounts.

customer orders (Co’s) Evaluate the integrity of the existing client base, which incorporates customer schedules by date, volume increments that drive the planning process and single or multiple “ship to” addresses.

forecasting Evaluate how forecasting is undertaken within and outside of the system from a planning and execution perspective. Importance is placed on quality of data and a clean flow of information between other modules and systems.

purchasing Review the cycle of PO release, frequency of order placement, the cost of order placement and the impact on your inventory levels. This includes a review of lot size and order policy

planning This incorporates a review of the demand planning process identifying process disconnects, delays in processing and poor use of planning tools.

documentation Identification and modification of existing documentation that is used to support business planning decisions. For example, promotions planning, launch planning etc

interfaces Review of all systems and interfaces which focuses on mapping accuracy, data flow timing, elimination of system errors and down time analysis that impacts on the business..

RF scanning procedures The documentation and procedure development covers all stages of the project: Functional documentation, UAT – User Acceptance Testing and training documentation.

demand planning assessment

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demand management, demand planning, sales forecasting

The aim of our assessment is to identify specific core issues that are impacting on the performance of your planning team, its systems and processes which limit their ability to achieve business outcomes.

By working on the drivers that influence the demand management and demand planning process, we are able to minimise variability of demand by creating a more responsive and cohesive supply chain through the application of statistical forecasting techniques at item, brand, category or business level. Understanding customer demand, the impact of poorly set planning parameters and the flow of accurate information will enable our team to develop a road map that will be the basis for improvement.

Find out more, visit: http://www.turnkeysolutions.net.au/Planning-Assessment.html

logistics challenges for the retail industry

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logistics challenges for the retail industry, retail logistics, retail supply chain

Is your company out of stock of best sellers skus?

Is there too much slow moving stock in stores?

Does your company have poor discipline with stock control?

Is your current replenishment method working?

​As the retail sector is experiencing very challenging market conditions due to the recent global financial crisis, many organisations are forced to review their entire operation to combat the range of factors that are inhibiting growth. The increased presence of online shopping, tightening of fiscal measures by banks and the escalation of operational costs such as transportation and rent are all barriers to growth for this sector.

​From a supply chain and logistics perspective, some retailers have been quite slow to change their business models and are now facing extremely difficult times as opposed to the last two decades where margins were much stronger. Incorrect inventory buy decisions created a bullwhip effect down the supply chain adding substantial inventory and additional administration costs to manage the stock down. The retailer typically had two selling cycles to address excess inventory issues which were season driven and end of year clearance. The dynamics of the industry have changed and require your organisation to change and remain ahead of the competition.

our way forward to meet the supply chain and logistics challenges for retail.

• Buy and sell through strategy needs to be developed to focus on improving inventory management between stores, distribution centres, warehouses and suppliers. This will include the formation of an inventory policy, procedures and protocols.

• Know your total cost to serve which incorporates all stores, warehouses and DC’s  within your supply chain. Understanding your cost base down to a store level will provide your organisation the ability to make informed decisions and implement the right strategy for supply chain and logistics.

• Implement the right Inventory Replenishment Model for your retail business. All resources that touch stock from warehouse through to retail store operations need to understand the importance of managing inventory and the role that they play in the process. Involvement of suppliers within your supply chain will allow for an end to end analysis of your inventory and implement the right inventory optimisation strategy for your supply chain.

• Implement the right supply chain technology that enables realtime linkages between vendors and key customers which will allow for transfer of information that drives the planning processes and enhances supply chain performance. Refer to our inventory reduction strategies that will suit the retail business sector and drive down inventory levels.

To discuss how we can assist your retail operation or simply view our other services, visit www.turnkeysolutions.net.au

retail replenishment strategy

Tags

improve inventory management in retail, improve retail stock turns, improve retail suplply chain, retail replenishment strategy, retail supply chain

• Is your company out of stock of best sellers skus?
• Is there too much slow moving stock in stores?
• Does your company have poor discipline with stock control?
• Is your current replenishment method working?

​As the retail sector is experiencing very challenging market conditions due to the recent global financial crisis, many organisations are forced to review their entire operation to combat the range of factors that are inhibiting growth. The increased presence of online shopping, tightening of fiscal measures by banks and the escalation of operational costs such as transportation and rent are all barriers to growth for this sector.

​From a supply chain and logistics perspective, some retailers have been quite slow to change their business models and are now facing extremely difficult times as opposed to the last two decades where margins were much stronger. Incorrect inventory buy decisions created a bullwhip effect down the supply chain adding substantial inventory and additional administration costs to manage the stock down. The retailer typically had two selling cycles to address excess inventory issues which were season driven and end of year clearance. The dynamics of the industry have changed and require your organisation to change and remain ahead of the competition.

Our way forward to meet the supply chain and logistics challenges for retail.

• Buy and sell through strategy needs to be developed to focus on improving inventory management between stores, distribution centres, warehouses and suppliers. This will include the formation of an inventory policy, procedures and protocols.

• Know your total cost to serve which incorporates all stores, warehouses and DC’s  within your supply chain. Understanding your cost base down to a store level will provide your organisation the ability to make informed decisions and implement the right strategy for supply chain and logistics.

• Implement the right Inventory Replenishment Model for your retail business. All resources that touch stock from warehouse through to retail store operations need to understand the importance of managing inventory and the role that they play in the process. Involvement of suppliers within your supply chain will allow for an end to end analysis of your inventory and implement the right inventory optimisation strategy for your supply chain.

• Implement the right supply chain technology that enables realtime linkages between vendors and key customers which will allow for transfer of information that drives the planning processes and enhances supply chain performance. Refer to our inventory reduction strategies that will suit the retail business sector and drive down inventory levels.

To discuss how we can assist your retail operation or simply view our other services, visit www.turnkeysolutions.net.au