Proof of stock reduction
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The document discusses efforts by the IT department to reduce stock levels at an auto parts company between August 2005 and December 2006. It finds that: 1) Total stock was reduced by KD 90,000, but efforts by the IT department specifically reduced controlled stock items by KD 30,000. 2) Focusing only on controlled items shows stock reductions of KD 110,000, more clearly demonstrating the impact of the IT measures introduced. 3) While stock was reduced, the full KD 110,000 reduction is not visible in financial reports due to stock valuations being merged and obsolete stock provisions.
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Proof of stock reduction
- 1. Proof Of Stock Reduction due to Sincere Efforts from IT Department Prepared by: Ghassan Kabbara December 19th 2006
- 2. Auto Car Parts Trend of Stock Value since August 24th, 2005. (Excluding MC Stock) COST OF STK 2000000 2020000 2040000 2060000 2080000 2100000 2120000 2140000 2160000 2180000 23/08/2005 06/09/2005 20/09/2005 04/10/2005 18/10/2005 01/11/2005 15/11/2005 29/11/2005 13/12/2005 27/12/2005 10/01/2006 24/01/2006 07/02/2006 21/02/2006 07/03/2006 21/03/2006 04/04/2006 18/04/2006 02/05/2006 16/05/2006 30/05/2006 13/06/2006 27/06/2006 11/07/2006 25/07/2006 08/08/2006 22/08/2006 05/09/2006 19/09/2006 03/10/2006 17/10/2006 31/10/2006 14/11/2006 28/11/2006 12/12/2006
- 3. Stock Position is being daily monitored. COSTOFSTK 2000000 2020000 2040000 2060000 2080000 2100000 2120000 2140000 2160000 2180000 23/08/2005 06/09/2005 20/09/2005 04/10/2005 18/10/2005 01/11/2005 15/11/2005 29/11/2005 13/12/2005 27/12/2005 10/01/2006 24/01/2006 07/02/2006 21/02/2006 07/03/2006 21/03/2006 04/04/2006 18/04/2006 02/05/2006 16/05/2006 30/05/2006 13/06/2006 27/06/2006 11/07/2006 25/07/2006 08/08/2006 22/08/2006 05/09/2006 19/09/2006 03/10/2006 17/10/2006 31/10/2006 14/11/2006 28/11/2006 12/12/2006 • As of August 24th 2005, Stock Value was KD, 2,160,370 • As of December 17th 2006, Stock Value is KD 2,070,102 • Over Net All Stock has been reduced by KD. 90,000
- 4. Net Stock Reduction Due to Efforts is KD 30,000 COST OF STK 2000000 2020000 2040000 2060000 2080000 2100000 2120000 2140000 2160000 2180000 23/08/2005 06/09/2005 20/09/2005 04/10/2005 18/10/2005 01/11/2005 15/11/2005 29/11/2005 13/12/2005 27/12/2005 10/01/2006 24/01/2006 07/02/2006 21/02/2006 07/03/2006 21/03/2006 04/04/2006 18/04/2006 02/05/2006 16/05/2006 30/05/2006 13/06/2006 27/06/2006 11/07/2006 25/07/2006 08/08/2006 22/08/2006 05/09/2006 19/09/2006 03/10/2006 17/10/2006 31/10/2006 14/11/2006 28/11/2006 12/12/2006
- 5. How Stock Reduction was achieved? • 1st Step: Reprogrammed Application to Cater for Maximum 3 months stock from previous 4 months stock. (This was introduced after a thorough analysis of the Inventory Data made available to me by the IT Dept. Involved many simulations prior to implementation. ) • 2nd Step: Changing Bi-monthly Shipment of Stock from supplier to Weekly Shipments for Replenishment Orders. • 3rd Step: Introducing Controls in Application to minimize Panic Orders, Monitor and Eliminate Back Orders. • 4th Step: Keeping a Close watch of the Stock (utilizing Utilities to provide me with alerts for abnormal events.)
- 6. Break Down of Stock for Auto Parts Non Supplier Items OILS, Batteries, Galco GAS Local Purchase, Used Those items that did not expereince an Automated Stock Control. Local Purchases are made by Warehouse Controlled Stock Those items Selected from 2004 Database that have experienced over 12 months of Stock Reduction
- 7. Controlled Stock • Total Items 50,000 • The Stock has witnessed a Net Reduction of KD.90,000 but in reality and due to our efforts KD 30,000 is reduced.KD 60,000 due to LP Used Items(correction of Cost) • It was only these controlled stock items that were being affected by the Controls. The Non- Supplier Items, we have no control off and neither the Local Purchases. Controlled Stock Those items Selected from 2004 Database that have experienced over 12 months of Stock Reduction
- 8. True Affect of Controlled Stock Reduction • Therefore in order to see the True affect of the Stock Reduction that has occurred due to the measures and controlled introduced one has to Focus on those Controlled List. • That is measure the outcome (Stock Reduction only for those controlled 49220 Line Items.) Controlled Stock Those items Selected from 2004 Database that have experienced over 12 months of Stock Reduction
- 9. Visual of Controlled Stock Reduction Vs Total Stock Reduction 1,700,000 1,750,000 1,800,000 1,850,000 1,900,000 1,950,000 2,000,000 2,050,000 2,100,000 2,150,000 2,200,000 Controlled Stock 1,985,100 1,948,858 1,913,339 1,878,705 1,880,588 1,874,690 All Stock 2,158,058 2,117,002 2,109,810 2,094,602 2,089,481 2,077,102 21/08/05 31/12/05 31/07/06 30/09/06 13/11/06 18/12/06
- 10. Cumulative Stock Reduction Months Vs Stock reduction - 20,000 40,000 60,000 80,000 100,000 120,000 Cont Dec 36,241 71,760 106,395 104,511 110,410 All Stk Dec 41,056 48,248 63,456 68,577 80,956 4 11 13 15 16
- 11. Further Proof of Stock Reduction for the Controlled Items. • We have taken all those Purchases and Sales at Cost for the controlled 49220 items. Clearly you can see that KD. 85,580 is being reduced. • Please note that the Purchases are measured at last replacement Cost and Sales are measured at weighted average. Hence we are not really comparing apples-to- apples.
- 12. Why this KD 110,000 Reduction cannot be seen in Finance Reports. • The reason we cannot see this in our Financial Reports is simply because in Finance Stock Values are not broken down and Auto Car Parts and MCPP Parts are all merged into one. Not to forget that Obsolete Stock Provisioning has been made in Finance Records. • This is a well known Phenomena that arises between Parts Dept and Finance Dept. Each have their reporting structures to serve their purposes.
- 13. Summarizing … • Efforts in the last 18 months have been dedicated to Spare Parts Inventory Management. • The Challenge was that their was no capture of Relevant data that could aid me the introduction of the latest techniques in Ordering. Not to Forget the Supplier restrictions and interferences with our Orders.
- 14. • Relevant Information I am referring to is Measuring Lead Times of all Items, Capture of Residual Stock, Capture of Critical Data on items that are ordered Manually and for the Sake of Urgent Orders, etc…..
- 15. • Also not to forget that Local Purchases( Consumables also contaminate the stock position.) • Recently Also the introduction of Items purchased on Whole Sale ( such as Oils, Batteries, Galco Gas, etc..). These items are also beyond my control.
- 16. Thank You • All Data Sources are available to our auditors to double confirm the Figures that I have referred to in this presentation.