7. Disenchantment I am an accountant but, I found that some concepts in accounting are not applicable in inventory management Inventory Turnover, Inventory Days Inventory Forecast Ratio analysis Before the above realization, I often got dissonance with our operation people until a day, I learnt Excel and their functions & programming
8. Realization Mindset of working in detail All calculation must have workings All workings must have evidence All evidence must have its milieu All milieu must have its assumptions and objectives
10. Basic Formula Opening + In – Out = Closing Opening + Purchase – Sold = Closing Purchase = Closing – Opening + Sold Closing = Summation of Units to be sold of future days covered by Target Inventory Days
16. Target Inventory Days/Weeks In inventory perspective, it is the cushion to handle any fluctuation of future demand It asserts that inventory balance should be various on the future demand It is also the tolerance of cash being held up in terms of inventory
17. Another perspective By setting 3 weeks of target inventory weeks, you pull in the requirement inventory 3 weeks well in advance e.g., if you need to use RM-A in week 10 by 100 units, Week 11 by 200, Week 12 by 300, the order time is 5 weeks Refer to worksheet example
19. Safety Stock Level How do you define it? It is the estimated consumption of a certain period of time to cater for any fluctuation of demand happen at any point of time Should it be based on past experience or future demand? Can we prove it?
20. What should be MRP? BOM Materials But what should be included in BOM? All precious items All items in pieces All packing materials? All consumables? (but what is consumables?) All tools? All needs to be measured!!
21. Critical to reduce Stock Short lead time by supplier Equalize MOQ to SPQ Minimize SPQ More accurate forecast (!!) Frequency of delivery Lead time offered to your customers / Width of frozen window
22. MRP Fine Tuning Purpose Spot out the following problems Abnormal balance Reveal Shortage to trigger pull-in Reveal Excessive Stock to trigger push-out Insufficiency of inventory balance
23. MRP Fine Tuning Assumption 8 Weeks of Inventory to monitor HK WH takes time to ship to PRC WH Available Qty = WH Qty – Reserved Qty Overdue P/O Qty not considered 3 weeks of requirement as Safety Inventory Level
24. MRP Fine Tuning Data to highlight HK WH & PRC WH Qty < 0 Available Qty < 0 1st week requirement consumes HK WH Qty Weekend Qty < next week requirement Excessive Qty Already excessive with additional P/O Qty With P/O Qty, it is excessive
26. BOM For simplicity, we only focus on single level BOM We only concern about the quantity after normal scrap specified in BOM We assume the unit of measure of RM in BOM same as warehouse SKU
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28. Routing It is the flow of production It is based on workstations which specify the labor hours to complete every task of the assembly process It is related to Takt time in optimization
29. Routing - Problems Labor Cost / Man Hours Inefficiency Low Season / Fluctuation
30. Stock Aging Report Assume FIFO, first in first out for the incoming materials Categorize inventory in order to sort out the focus Focus on the irregular pattern of incoming transaction – it should be leaning to right
31. Special Excel functions Range Name Operator: &, $ min, max vlookup(key, range, column, true/false) Match Iferror(formula, value) Index(range, row, column) Indirect(cell.address) sumif, sumproduct
32. Tips Index > vlookup Remember the use of $ Great value of “&” When using “indirect”, reference to the original formula Batch total & check sum Refresh your memory