Jason Bader, Principal The Distribution Team

I Need More Stuff!!

I Am Not Made of Money!!

The Main Event

Finding the Balance The essence of inventory management is to fulfill the customer’s needs while satisfying the financial needs of the organization. Customer Service Inventory Turns

Inventory Turns 12 Months Cost of Goods Sold from Stock Sales Average Inventory Value Does not include direct ship Does not include special orders Should not include transfers

Customer Service Number of Lines Shipped Complete Number of Line Items Ordered Pass / Fail mentality Shoot between 92-95% overall Look at safety stock to correct

Fixing the Turns 12 month cost of goods sold from Stock sales Average inventory value Convert the slow to non-stock Reduce the surplus on hand Clear out the dead items

The HITS Report ITEM CODEON HAND UNIT CST $ INVEST HITS AVE MO MO ON HAND SUP AB LEN 656R HK CW ITW WS MAK MQ CAL CAD 32H SUP CM PLS LAS 4G

Carrying Cost of Inventory (K) The cost incurred by holding inventory in our facilities. Typically 25% - 30% annually. Components: Rent Labor Taxes Interest Shrinkage Opportunity Cost

Dead Stock Management

Dead Stock Company definition Be consistent Bad things happen in time

Dead Stock - Identification Run your monthly inventory obituary. Look for slow moving inventory. Less than 4 “hits” per year is a good candidate for the graveyard.

Dead Stock - Prevention Make it hard to bring new items into stock. New items are #1 one cause. Owners are the number one buyer. Create a new item committee.

New Item Checklist Gather pertinent info Freight considerations Payment terms Expected margins Current distribution Sell through guarantee Product liability insurance

New Item Committee Sales, purchasing, accounting and operations Review new lines and lines to get rid of 3 Plans with timetables

Dead Stock – Coordination Appoint a Dead Stock Manager. Reports to the President. Look for an incentive based pay for this individual.

Dead Stock - Disposition Return to vendor Bundle with good product Have a yard sale Peer networking Sell it online Charitable contributions Dump it

The Product Mix Challenge

Fixing Customer Service Number of Lines Shipped Complete Number of Line Items Ordered Develop a customer centric view of stock levels Adjust percentage based on hits Look at safety stock to correct

Customer Centric Stocking Respect geographical preferences Review the expedited transfers Don’t use a cookie cutter approach

Safety Stock Safety stock is like an insurance policy for your customer service. You are investing additional dollars in inventory to protect against two distribution issues: Erratic customer demand Erratic supplier lead time

Safety Stock Formula Calculated as a percentage, or number of days, of the lead time usage. Usage = 60 units/monthLead time = 2 weeks (UR x LT) x SS% (60 x.5) x 50% = 15 Could be stated as 7 days of safety if required by system.

The HITS Report ITEM CODEON HAND UNIT CST $ INVEST HITS AVE MO MO ON HAND SUP AB LEN 656R HK CW ITW WS MAK MQ CAL CAD 32H SUP CM PLS LAS 4G

Safety Allowance Using the HITS ranking Top 5%100% Next 5%75% Next 10%50% Next 30%25% Final 50%None Don’t over insure your slow moving product!!

Keys to Success Be sure to measure both Turns and Customer Service Purify the Turns number Run a monthly obituary for your dead and slow Consider a dead stock coordinator Establish dead stock goals Develop a customer centric view of inventory Review the safety stock settings in your system

Finding Jason (Best way) Office Distribution Executive Coaching / Consulting Monthly E-Newsletter Inventory Counts