Best Practices For Inventory Reduction
Best Practices For Inventory Reduction
Best Practices For Inventory Reduction
Gary Gossard
IQR International
Presentation Outline
Best Practices Top Ten Inventory Reduction Practices Inventory Quality Ratio Reduction Strategies and Case Studies
Identify and Reduce the Excess Revise Material Ordering Guidelines Use Continuous Improvement
Definition 1
A Best Practice is a process or technique that has a proven record of success in providing significant improvement in cost, schedule, quality, performance, safety, environment or other measurable factors which impact the health of an organization.
The Best Manufacturing Practices Center of Excellence
Definition 2
A Best Practice is a group of tasks that optimizes the efficiency or effectiveness of the business discipline or process to which it contributes. It must be implementable, replicable, transferable and adaptable across industries.
The Gartner Group
Survey of inventory managers Reported top 5 best practices Tabulated by company size
Under 500 employees Over 500 employees
65% 50% 42% 37% 37% 34% 31% 23% 22% 21%
Survey Conclusions
Periodic Review still most popular Order Quantities biggest gain Using more analytical approaches
Past usage and safety stocks Lot sizes and order quantities ABC classifications
Takes more than one best practice Inventory reduction a two step process
1992-2005 IQR International, Inc.
Introducing IQR
A comprehensive approach to reducing inventory investment. A more useful method of measuring inventory performance. Developed by 35 materials managers. Combines 7 of top 10 best practices.
1992-2005 IQR International, Inc.
IQR Logic
NM
12
BOHV
MRP / ERP
Data Extract
E3
H
AWWRV
G H K
6
AWWUV
SM
DEF
80 - 15 - 5 % 4 - 12 - 24
ABC BC
B
E1
E2
A1
1992-2005 IQR International, Inc.
A2
IQR =
IQR =
10%
Total
372
17,689
4,218
27,264
1,756
3,667
54,965
32.9%
IGT
45 40 35
40,000
30 25 20
30,000
15 10 5
6/98
8/98
10/98
12/98
2/99
4/99
Added
Central office switching networks Genoa, IL: 800 employees, 300K s.f. Inventories
20,000 active part numbers $16 million purchased parts $9 million WIP and finished goods
1992-2005 IQR International, Inc.
Improvement Strategy
A Three Step Approach
1. Stop the Bleeding
Cancel or defer excess open orders
2. Clean House
Identify slow and obsolete inventories Assess potential for reducing write-offs
AGCS
50
45
8,000
SM+NM IQR %
35
30
6,000
25
20 4,000 15
10 2,000 5
0 0 1 2 3 4 5 6 7 8 9
Active Excess
40
Materials
Sales
Engineering
30 turns 40 turns
IQR Environments
Manufacturing companies
material planners buyers production schedulers operations management financial management
Dialogic - Intel Corp. Dow Chemical Eastman Chemical Engenio IT - LSI Logic Erico Incorporated GKN Automotive Honeywell Hyundai Johnson & Johnson Katy Industries Korry Electronics Kohler Companies Krebs Engineers LuK Automotive Motorola National Oilwell National RV Newell-Rubbermaid
Nilfisk-Advance Oakley Ocean Cuisine OSullivan Industries Pharmacia Italia Rheem Manufacturing Ricon Corporation Schering-Plough Schlumberger Stanley - MAC Tools Telex Communications Tyco Electronics Unilever Bestfoods Wellman Products Wenger Corporation Woodward Governor Valmont Industries Vita-Tech International
Conclusions
MRP/ERP good for planning Best practices needed to manage IQR combines best practices with $ focus Keys to reducing inventories:
Focus on the dollars prioritize opportunities Identify the excess stop the bleeding Apply dynamic ABC analysis work smarter Re-evaluate ordering rules fine tune MRP Monitor movement address root causes
Make the planners job easier. Improve turns, cash flow and profits.
1992-2005 IQR International, Inc.
Questions?
[email protected] (949) 487-5400