OMSAN LOJİSTİK

Customer Service / Fill Rate Planning Inventory Planning and Management Latin America Logistics Center Logistics Management Series -

Fill Rate Planning Fill Rate Forecasting EOQ Replenishment Positioning Inventory

Segmentation of the Logistics and Inventory Planning Strategy

What Customers Want?

Fill Rate Planning Optimum Fill Rate vs. Actual Fill Rate Customer Satisfaction Computer Assisted Fill Rate Planning Case Studies

Definition Fill Rate Inventory Fill Rate is the Definition and Planning of the Product Availability to Satisfy Customer Orders Fill Rate should be defined by: –Product Type –Customer Type –Channel –Method of Evaluation

Optimum Customer Service Level / Fill Rate $- $500 $1,000 $1,500 $2,000 $2,500 $3, %60.000%65.000%70.000%75.000%80.000%85.000%90.000%92.500%95.000%97.000%98.000%99.000%99.500%99.700%99.950% Customer Service Level Measured as Fill Rate Inventory Carrying Cost Lost Sales Cost Total Policy Cost

Total Inventory Cost vs. Fill Rate TIC = Lost Sales Cost + Inventory Carrying Cost = LSC + ICC LSC = Unsatisfied Demand x Unit Price x Scarcity Factor = AD x (1-FR) x UP x SF ICC = Average Inventory Level x Unit Inventory Value x Inventory Carrying Rate = AIL x UIV x ICR

Total Cost of the Inventory Policy Annual Demand AD % Unsatisfied Demand (1-ufr) Unit Sales Price USP Scarcity Factor SF Lost Sales Cost LSC = f(ufr) Purchase Order Cost POC Annual Demand AD 1/Unit Inventory Value. 1/UIV 1/Inventory Carrying Rate. 1/ICR Economic Order Quantity (half) EOQ/2 Lead Time L Unit Fill Rate ufr Forecast Error e Safety Stock SS Average Inventory Level AIL Unit Inventory Value UIV Average Inventory Value AIV Inventory Carrying Rate ICR Inventory Carrying Cost ICC = f(ufr) Total Policy Cost TPC = f(ufr) + x x x x x EOQ = [(2*AD*POC)/(ICR*UIV)] 1/2 SS = f(e, ufr, L) +

Optimum Fill Rate Planning Parameters Inventory Carrying Rate (ICR) Purchase Order Cost (POC) Scarcity Factor (SF) Unit Sales Price (USP) Unit Inventory Value (UIV) Lead Time (L) Annual Demand (AD) Forecast Error (e)

Expected Outcome Optimum Fill Rate Optimum Inventory Turnover Efficient Order Quantities Outcomes Segmentation –By Product/segment –By Customer/segment

Parameters Inventory Carrying Cost

Parameters By Product Type

Outcome Economic / Efficient Order Quantity

Outcome Average Inventory Value vs. Turns

Outcome Fill Rate Optimization

What Fill Rate? SCENARIO 1 Part Ordered Received A1, B2,000 1,990 C4,000 3,990 D2,000 1,990 E1, Total 10,000 9,950 Line Fill Rate 0.0% Order Fill Rate 99.5% SCENARIO 2 SCENARIO 2 PartOrderedReceived A 1,000 1,000 B 2,000 2,000 C 4,000 0 D 2,000 2,000 E 1,000 1,000 Total 10,000 6,000 Line Fill Rate 80% Order Fill Rate 60%

Fill Rate by Product PART FILL RATE PART VALUE ($) INVENTORY ($) 95% $1,054 $50 $1,384 $500 98% 0% $1,216 $50 $0 $500 FILL RATE Same FILL RATE Product Service Level Probality of being in the order* 95% 97%3% * Frequency that the part is needed Keyboard PC CPU 95% 97%3% Different FILL RATE Keyboard PC CPU

Order versus Product: Fill Rate? Define: Pij = Probability that product j is required in order i  i = Proportion of orders i completed on time  j = Fill Rate product j              j jij P i 11 

Modeling Fill Rate Recommendations

Model vs. Current Fill Rate By Category

The model results suggest an opportunist to save over $9.5 million in annual inventory carrying cost and reduce the on-hand inventory by up to $22 million. On-Hand Inventory Model vs. Current

Model vs. Current – DC On-Hand Inventory

Model vs. Current Service Stock

Model vs. Current Direct Sales Inventory Turns

Model vs. Current Service Stock Turns

Model vs. Current Inventory Turns per Category

Inventory Model Analysis

Recommendations from a Model of Fill Rate Planning

Inventory Equilibrium Exercise using the Fill Rate Planner ®