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Inventory Management
IV. INVENTORY MANAGEMENT 4 .1
J I T L o g is is t i c s • S e l l On O n e Bu B u y On O n e Co Co n c e p t • S t o c k i n g Po Po l i c y
4 .2
Inventory Co on n t r o l Pa Pa r a m e t e r s
4 .3
M I P Se t t i n g & Or d e r i n g
JIT Method Just in Time parts Logistics is the essence of Inventory control at Toyota.
Receiving Heijunka Order
Order cycle Reduction
Inventory Control
Order Order Placing Placing - Parts Receivi Receiving ng L/T Reduction
Sell One Buy One Concept Just- In-Time In-Time Parts Logistic is based based on the Sell One Buy One Concept.
“It means that parts flow through the logistics chain at the same pace as customer demand” Sell One Buy One and JIT logistics require • High frequency stock replenishment • MAX-MAX Inventory control • Clearly defined stocking policy
Basic principles. The basic elements of JIT Parts Logistics is frequent, small lot ordering and delivery 1. Max-Max Inventory control
“Sell One - Buy One” concept TKM will start initially with weekly ordering and will move to daily ordering. Max-Max Inventory control will allow lower safety stock and inventory at the dealership
Order Taking - Reducing Dealer Order Fluctuation Comparison of weekly order (W/O) - MA MAX X-MAX and MAX-MIN. WEEKLY ORDER /MAX-MAX
WEEKLY ORDER / MAX-MIN
MAX=15
MAX=17 MIN=13
20
MAX
O/H MIN
= order = on order = sales q’ty
= receiving = on hand = receiving q’ty
13
MAX
With MAXMAX -MAX parts are ordered at every order opportunity. Therefore stock levels fluctuate only half as much as with MAX -MIN. Maximum Inventory Position Position is also lower with MAXMAX -MAX.
15
2. Heijunka - Ordering Stability
Heijunka means that a stable level of ordering is obtained, resulting in a stable flow of parts through out the logistics chain, allowing standardized and efficient operations To achieve Heijunka the following activities are necessary • Separation of Actual and Created Demand • Stability in workshop scheduling • Irregularity control
1 Separating Actual Demand and Created Created Demand
Order Quantity
Created Demand (Fluctuating) : Customer demand which is not for immediate use by the end user
Total Demand
Created Demand
Actual Demand
Actual Demand (Stable) : Customer demand which is for immediate use by the end user Time
• It is necessary to separate Created Demand and Actual Demand and handle them separately.
( Dealer to TKM ) Reducing Dealer Order Fluctuation Fluctuating ( Sell One Buy One Not Followed ) Part Numbers Ordered A A A B M
B B B C T
D D D W
A A A C C T
B B B F
Dealer order lines/day
M
T
W
T
Stable ( Sell One Buy One Is Followed ) Part Numbers Ordered A B C D M
A B C D T
A B C D W
A B C D T
A B C D F
Dealer order lines/day
F
• Much S/S required • Fluctuation in warehouse work volume and manpower requirements
M
T
W
T
F
• Little S/S required • Little fluctuation in warehouse work volume and manpower requirements
Stocking Policy Stocking Policy to achieve a Service Rate of 95% 1. Stock Range Stock range is the number and type of part numbers in dealer stock and it should be based on a) Needs of Service [Parts Type] b) Demand c) Customer type
2. Stock Depth Stock depth is the quantity for each part number in stock • It should cover the order cycle, lead-time and additionally additionally some safety safety stock on a part number number or parts group basis. • The formula for Maximum Inventory Position (MIP) is used to calculate Suggested Order Quantity(SOQ).
MIP = MAD * ( O/C + L/T + S/S [ L/T + Demand ]) MAD = Monthly Average Demand O/C = Order cycle L/T
= Lead time
S/S = Safety stock
Stocking Criteria When to add new parts to your Stock? • When demand occurs for the same part continuously for 2 months or 2 times in 3 months
DEMAND
N-4
N-3
N-2 N-1
N STOCK ?
PART 001
YES
PART 002
YES
PART 003
NO
Inventory Control - Parameters 1. Inventory Control Class [ICC] 2. Special Control Class [SCC] 3. Monthly Average Demand [MAD] 4. Ordering Parameters 5. Order Quantity Calculation 6. TDMS Procedure
1 . Ge Ge n e r a all I n v en e n t o r y C o n t r o l Cl a s s [ I C C] C] Examples of ICC tables TOPSS - Moving Class MAD Criteria ( PCS ) 999999.9 A1
A2
A3
A4
A5
B1
B2
B3
B4
B5
C1
C2
C3
C4
C5
D1
D2
D3
D4
D5
E1
E2
E3
E4
E5
800
400
200
• Matrix with quantity and demand fluctuation .
Demand Fluctuation Highest Demand - Lowest Demand = MAD
100
0
20
50
100
200
9999.99
Fluctuation Criteria
• 6 months demand history is used.
2 . Sp Sp e c i a l In I n v e n tt o r y C o n t ro r ol s s [ SC C] o ll C l a ss CC
Examples of parts which should be controlled with SCC codes = Campaign parts, Seasonal parts, New model parts, Large parts, High value parts, etc.
Automatic control SCC
Manual control SCC
• Set-up criteria for each SCC type by product. • The system assigns or updates the code automatically on a P/No. basis.
• Set these SCC codes, manually by item or product. • Update must also be performed manually.
2 . Sp Sp e c i a l In I n v e n tt o r y C o n t ro r ol s s [ SC C] o ll C l a ss CC
Example of SCC Classifications in TOPSS SCC Type
Auto setset-up
Product Group (Note)
New model parts
Purpose for Special Control
0-6 months
Control with initial supply Q’ty
7-24 months
Special control to follow recent trend ( 3 months demand for MAD )
25 months
Carefully monitor demand fluctuation trend ( 6 months demand for MAD )
Seasonal parts
Control stock considering seasonal trends.
Large parts (Large storage space required)
Minimize stock volume
Parts for specified vehicles (i.e. Land Crusier parts)
Ensure high suppliability
HighHigh-value parts ( Significant risk piece )
Minimize stock investment
2 . Sp Sp e c i a l In I n v e n tt o r y C o n t ro r ol s s [ SC C] o ll C l a ss CC
Example of SCC Classifications in TOPSS
SCC Type
Manual SetSet-up
Product Group (Note)
Purpose for Special Control
Campaign parts (Abrupt decrease in demand before or after; A significant increase in demand during the campaign)
Maintain appropriate stock volume which follows the fluctuation trend of demand.
Warranty parts (Only service dept. knows required parts, quantity and time)
Maintain stock according to information from service dept.
Accessories (linked to new vehicle sales)
Procure parts and maintain stock to meet new vehicle sales volume.
Discontinued parts (production is not possible)
Only supply these parts to customers when there is actual demand.
3 . M A D [ M o nt n t h l y A v er a g e D e m an d ] SOQ = MAD x ( O/C + L/T + S/S for L/T + S/S for Demand ) - ( O/H + O/O ) + B/O Maximum Inventory Position [MIP] 1 MAD Calculation • Calculate MAD based on order receiving data, rather than sales data. Sales based MAD calculation
Order receipt based MAD calculation
B/O release
MAD
MAD
Sales
Order Receipt
B/O B/OB/O B/O B/O
2
1
2
3
4 5
6
7
8 9 Month
• Adopt FILL system ( FILL vs. KILL ) • Recalculate Recalculate MAD monthly monthly.
2
1
2
3 4
5
6
Month
4 . Or Or d e r i n ng g Parame ett e r s SOQ = MAD x ( O/C + L/T + S/S for L/T + S/S for Demand ) - ( O/H + O/O ) + B/O Maximum Inventory Position [MIP]
by ICC/SCC
by Supplier
ORDER CYCLE LEAD TIME SAFETY STOCK FOR LEAD TIME SAFETY STOCK FOR DEMAND FLUCTUATION
• Order Cycle is the period of time between stock replenishment o rders.
Order Cycle : Monthly Weekly Daily
: 1 time / month = 1.00 : 4 times / month = 0.25 : 20 working days / month = 0.05
4 . Or Or d e r i n ng g Parame ett e r s SOQ = MAD x ( O/C + L/T + S/S for L/T + S/S for Demand ) - ( O/H + O/O ) + B/O Maximum Inventory Position [MIP]
by ICC/SCC
by Supplier
ORDER CYCLE LEAD TIME SAFETY STOCK FOR LEAD TIME SAFETY STOCK FOR DEMAND FLUCTUATION L/T = Average period from ordering to binning completion (ex) 6 days = 0.25 months S/S for L/T = Safety Stock used to cover fluctuation in L/T Exceptions are not included when determining S/S for L/T
L/T S/S for L/T
{ Average Receipt
4 . Or Or d e r i n ng g Parame ett e r s SOQ = MAD x ( O/C + L/T + S/S for L/T + S/S for Demand ) - ( O/H + O/O ) + B/O Maximum Inventory Position [MIP]
by ICC/SCC
by Supplier
ORDER CYCLE LEAD TIME SAFETY STOCK FOR LEAD TIME SAFETY STOCK FOR DEMAND FLUCTUATION
customer demand ( sales ). • Safety Stock for Demand is used to cover fluctuation in customer • Level of Safety Stock for Demand is controlled by ICC/SCC.
4 . Or Or d e r i n ng g Parame ett e r s Safety Stock for Demand (Example) S/S for Demand Level High
Low Lo w A1 B1 C1 D1
Moving Class
A Very Fast B Fast C
Medium Slow
D E Very Slow
A2 B2 C2 D2
A3 B3 C3 D3
A4 B4 C4 D4
Level for S/S for Demand A Sales Share(%) B Target S/R(%)
Small Medium
A5 B5 C5 D5 Fluctuation
A x B
45.0
99.0
45.0
Large
25.0 18.0
98.0 96.0
25.0 17.0
Medium / Large Fixed Stock Q’ty
8.0 2.0
88.0 75.0
7.0 2.0
OVERALL TARGET SERVICE RATE
96.0 %
4 . Or Or d e r i n ng g Parame ett e r s
SOQ = MAD x ( O/C + L/T + S/S for L/T + S/S for Demand ) - ( O/H + O/O ) + B/O Maximum Inventory Position [MIP]
O/H = On Hand Quantity O/O = On Order Quantity B/O = Back Order Quantity
5 . O r d e r Qu Qu an a n t i t y Ca Cal ng g a l c u l a t i o n & Or d e r i n REVIEW SOQ = { MAD x ( O/C + L/T + S/S for L/T + S/S for Demand) } - ( O/H + O/O ) + B/O Maximum Inventory Position
• Place orders using MAX -MAX inventory control. Review Question : Question : What is the Suggested Order Quantity? (O/H=30, O/O=20, B/O=0, O/C=0.25, L/T=2.0, S/S=1.25) Monthly Demand Results : N
N-1
N-2
N-3
N-4
N-5
6 Months Demand Total
25
11
18
22
13
19
108
Answer : MAD = 108 pieces / 6 Months = 18 SOQ = 18 x ( 0.25 + 2.0 + 1.25 ) - ( 30 + 20 ) + 0 = 13
6. ICC Tab le ICC TABLE
S a f e t y St S t o c k f o r De De m a n d Examples of ICC tables TDMS - Mov Moving ing Class Class MAD Criteria ( PCS )
- S/S for Dema Demand nd
999999.9 A1
A2
A3
A4
A5
600
0.10
0.15
0.20
0.25
0.25
0.15
0.20
0.25
0.30
0.40
0.20
0.25
0.25
0.40
0.50
0.25
0.25
0.30
0.30
0.40
0.40
0.50
0.50
0.60
0.50
50
100
200
600 B1
B2
B3
B4
B5
300
300 C1
C2
C3
C4
C5
150
150 D1
D2
D3
D4
D5
30
30 E1
0
999999.9
E2 20
50
E3 100
E4 200
E5 9999.99
Fluctuation Criteria
0
20
9999.99
7 . I n v en en t o r y M a n a g e m e n t
Data can be collected collected from above abov e reporting rep orting menu option. •
7 . I n v en en t o r y M a n a g e m e n t
Inventory Trend Tren d Report Input IInpu nputt screen .
•
7 . I n v en en t o r y M a n a g e m e n t
• • • •
Open TOPSSNT F older in window directory directory in C Drive Folder Then run r un the Inventory trend report.
7 . I n v en en t o r y M a n a g e m e n t
PRC. PRC. DATENO. DATENO. OF ITE MAD MAD AMO AMOUN UNT T SERV SERVIC ICE E RB/O RB/O ITEM ITEM B/O B/O AMO AMOU U B/O B/O STK STK M O/H MAIN MAIN AMOUN AMOUNT T O/H MAIN MAIN O/H F/O A O/H F/O ST O/H SVC AMOUNTO/H SVC S O/O SEA AMOUNT 200409 8770 211,305,807 100 0 0 0 223,370,388 0.7 0 0 23,871,628 0.1 33,165,095 200410 10827 213,722,236 100 0 0 0 216,185,505 0.7 0 0 8,162,043 0 41,992,144 200411 10831 213,947,351 100 0 0 0 201,708,126 0.7 0 0 5,869,218 0 26,249,843 200412 10834 215,006,925 100 0 0 0 192,774,810 0.7 0 0 12,763,671 0.1 23,285,923 200501 10839 221,650,833 100 0 0 0 177,786,277 0.6 0 0 9,344,065 0 16,734,386 200502 14933 218,870,240 100 0 0 0 190,275,204 0.6 0 0 14,409,229 0.1 23,226,037 200503 14946 227,761,334 100 0 0 0 229,424,561 0.8 0 0 1,668,136 0 26,809,227 200504 14972 219,804,735 100 0 0 0 254,188,148 0.9 0 0 14,318,590 0.1 31,260,408 200505 0 0 0 0 0 0 0 0 0 200506 0 0 0 0 0 0 0 0 0 200507 0 0 0 0 0 0 0 0 0 200508 0 0 0 0 0 0 0 0 0 IPT IPT ALL ALL FR ALL ALL SUPP SUPPLI LIER ER ALL ALL ICC ICC ALL ALL SCC SCC ALL ALL SCCM SCCM AL AL *** INV INVENTOR NTORY Y TRE TREND REPO REPOR RT ***
O/O SEA S O/O AIR AMOUNT O/O AIR S O/O F/O A O/O F/O S TTL TTL O/H O/H AMOU AMOUNT NT STD STD STK STK AMOU AMOUNT NT O/S O/S ITE ITEM M O/S AMO AMOUN UNTT O/S O/S STK STK MREP MREPL. L. ITE ITE REPL REPL.. AMO AMOUN UNTT REPL REPL.. STK STK MONT MONTHH 0. 2 15,302,144 0.1 0 0 223,370,388 278,605,811 391 99,195,650 0.5 271 178,302,701 0.8 0. 2 15,345,369 0.1 0 0 216,185,505 277,346,560 392 104,918,429 0.5 280 174,241,527 0.8 0. 1 15,345,369 0.1 0 0 201,708,126 279,681,819 367 95,554,661 0.4 299 179,397,572 0.8 0. 1 15,329,786 0.1 0 0 192,774,810 283,942,065 365 77,368,203 0.4 297 181,299,129 0.8 0. 1 15,329,786 0.1 0 0 177,786,277 285,871,304 359 63,762,357 0.3 313 181,191,449 0.8 0. 1 15,310,223 0.1 0 0 190,275,204 280,616,298 403 73,026,730 0.3 306 177,777,053 0.8 0. 1 15,308,023 0.1 0 0 229,424,561 288,928,228 520 117,085,085 0.5 295 178,256,888 0.8 0. 1 15,309,123 0.1 0 0 254,188,148 289,463,940 546 129,914,074 0.6 309 179,508,456 0.8 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 • •
Inventory trend Report Output.
7 . I n v en en t o r y M a n a g e m e n t
Inventory Analysis Anal An alysis ysis Report Output Screen.
• •
7 . I n v en en t o r y M a n a g e m e n t
Inventory Anal An alysis ysis Report Output Ou tput screen.
• •
Cooperation with other Sections Inventory Management Service
Sales Demand Control
Procurement
I/C Techniques
Lean Parts Logistics
