Agenda Current events Housekeeping Projects Warehousing Materials handling

What is the role of inventory Who is the customer? What are your company strategies? What are your company goals? How does this change as you move along the chain?

Why do we have inventories? Customers’ unreliable forecasts Our unreliable forecast Poor planning Poor inventory control Poor internal quality Unreliable suppliers and transportation Excessive supplier lead times, and poor quality Poor or unexpected maintenance Transportation opportunity How might these impact your logistical system?

Inventory Lower Inventory with High Customer service Inventory Demand Inventory Supply Which Link??

What is your strategic objective in holding inventory To facilitate economies of scale To aid in smoothing S & D To provide protection from uncertain demand To secure raw materials To hide problems created in other areas

Benefits vs. Cost Cost of holding Cost of not holding

Are you better off holding inventory or dealing directly with the root cause of the problem you are holding the inventory against? Why are you holding the inventory? Can you be successful?

Factors that influence inventory decisions Value Demand & Supply Pattern Availability Product type Criticality Space Cost Transportation, in and out

Types of inventory Normal – certain times Safety Stock – uncertain times JIC In-transit Speculative Seasonal Dead

Inventory management objectives What to order? How much to order each time? How frequently to order? How does it serve the customer? You need a management philosophy that’s strikes a balance between cost and customer service Who is your customer??????

Inventory Visibility, Know what you have and where it is!!! Where along the chain do you hold it?

What you need to keep it visible Tracking and tracing Summary and detailed reports Notification of failure and potential interruptions Communication You need good data from all links!! Where and how do you get it?

Benefits to keeping inventory visible Increase customer service Decrease cost of sales Improve relations Ability to be proactive Improve performance of your Supply Chain partners Improve your bottom line Create an advantage

In order to properly meet your objectives you must know the cost! Carrying cost Ordering cost Stock-out cost Transportation cost As in any part of your business, you must know the cost of your inventory decisions!

Inventory Carrying Costs Cost of Capital –Lost Opportunity Cost –Borrowing Costs Inventory Labor –Wages –Fringe Benefits Capital Investments –Building –Material Handling Equipment –Types of Storage

Inventory Carrying Costs Variable Costs –Heat and Light –Insurance –Shrinkage and Obsolescence Tracking Costs –Computer Time & Data Entry

Signs of Trouble Loss of customers Increasing number of back-orders Stable number of back-orders with a growing investment in inventory Periodic lack of storage space Deteriorating relationships with channel members How do you recognize them?

What can you do to fix it? Gain commitment from the top Improve the information system Examine other logistical activities Work on improving your forecasting Rank your inventory in some manner Incorporate useful tools—MRP,DRP,JIC and JIT– remember these are only tools Remember the total cost view of the system!

Packaging or Packaging? What is your objective in packaging? Type of product What is the role of packaging for your product? To Protect To Facilitate Handling Customer Service Security What is it for your project?

Packaging Trade-offs Cost vs. Level of protection Packaging vs. Transportation cost Cost vs. Level of security Mode Choice From which point of view? At what point in the chain?

Packaging and Global Logistics Varied conditions –Handling, environment Country specific packaging –Industrial, consumer, regulatory Degree of stability –Safety Degree of intermodality –Ease of transit Security Information Which degree of packaging?

Packaging Pitfalls, What are yours?

Warehousing An integral function in the world of Global Logistics Distribution Sourcing Processing Reverse logistics

Warehousing Functions of Warehouses—Where in the chain? –Receiving and sorting –Storage –Consolidation –Product Mixing –Cross Dock Sorting –Order Processing –Postponement

What is the role of Warehousing? How does this function fit into your business model? What does it do for you in your global logistics activities? What are the trade-offs? Not a place to hide your problems! Can it provide you with a sustainable competitive advantage??? How does it fit the system?

Warehouse Issues Transportation fit Demand Level Demand Stability, Seasonality Need for Control Numbers, Locations Layout Stocking Plans Automation and Material Handling Security Standardization

It’s all about the movement! What is the function of your warehouse(s)? Gathering Breakdown Multifunctional

Principles of Warehouse Layout One Story Design Move Goods in Straight Line Efficient Material Handling Equip. Efficient Storage Plan –Fast Movers Up Front –Complementary Products Together –Minimize Mispicks Minimize Aisle Space –NEVER Dead End Aisles Use Full Cube of Building

Advantages and Disadvantages of Centralization From a logistical perspective

Thoughts to remember Do not forget the systems approach! If you tweak one part of the equation it will have an affect on the others.

Thoughts cont. Changes often require the cooperation of channel partners The influence of country specificity

Where to locate your Warehouse?

What are the needs of your customers? What are your needs and the role of this facility? What cost are involved and what are your limitations? Look to the future! To centralize or not to centralize? That is the question! What do you do when one of your largest customers asks you to invest in their new warehouse facility?

Site selection How many and what size to have? Where should they be located? How do they best fit the system? Allocation of customer demand and vendor output What impact will these site have on entire system? Infrastructure/labor/environment/local trends/customers/etc.

Impact of warehouse location Inventory –Safety stock –Lead times and variance!!!!! Customer service –Order cycle times –Product availability –Variability of demand

Who owns and operates your Warehouse? Management must decide what resources they have to work with and the best way to allocate them Cost/benefit of Private vs. Public vs. Contract

Trade-offs Transportation Lead times Stockouts Production

Trade-offs Customer Service Design Control Commitment Initial investment Flexibility Country specific Shared information Local knowledge Extras Operational cost Exit strategy Definition of cost Education Carrier relations

What is your strategy? Is this function outsourced or performed in-house? Cost/control/additional services/duration Look to the future, what are the trends?

Global warehousing issues Who has the power? What trade-offs will be made? One approach or multiple? Size–level of security—climate control— transport access—ownership—labor— location—number—areas of responsibility

Facility design Efficient movement of goods Inventory efficiencies and storage cost Degree of customer service Degree of redundancy Manual or automated systems Degree of current and future constraints, an eye to the future Safety

Movement of goods Straight line movement Match with transportation options

To what degree do we automate?

Manual Warehouse Work best with demand extremes Very flexible system—Humans ? Wages/inaccurate placement/record keeping/damage/wrong pick/other human resource issues

Automated Warehouses Company or industry specific Degree of standardization Country specific issues Degree of stability

Automation systems Lift trucks AS/RS Horizontal movement Loading/unloading Sorting/screening Item picking Stationary robots Robot vehicles Activities automated Horizontal movement Storage and retrieval Scanning and updating Item picking Warehouse transportation Cargo handling Palletizing De-palletizing Inspections

Manual vs. Automated Cost Retraining Equipment reliability Software Systems integration System flexibility Overall system vs. country specific items

Helping you decide Characteristics of goods handled Desired through-put rates Building shape and size Labor availability Cost Ability to upgrade/redundancy What is the right mix?

Benefits of automation Product handling Information management Tracking Inventory management “Meet the needs of the customer while supporting the process”

Trends in automation Reliability Integration Flexibility Upgradeability Maintainability RFID