Southeast Computers Inventory webinar 10/22/14
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Someone just found $726,000 dollars of inventory in your warehouse! This webinar will help you to consider what you could be doing differently with your inventory processes to improve your business functions and profitability over all. We will be discussing: Forecasting Container Tracking Managing the paper and costing Bar coding is not the be-all, end-all Tracking what you have How to smooth out pick-pack & ship Real time, mobile access to your inventory
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Southeast Computers Inventory webinar 10/22/14
- 1. 7 Inventory Strategies Towards Be4er Profits SAGE NORTH AMERICA
- 2. Southeast Computer Solutions, a software consulting firm, that has been helping small to medium sized businesses implement warehouse management solutions since 1985. W hat do we do? Southeast Computer Solutions offers its clients expert technology consulting advice based on best practices. We listen to you and provide our best thinking solutions to meet your needs. We help clients by performing business analysis & offering our expert consulting advice specializing in Industrial engineering and helping clients design warehouses for maximum efficiency. SAGE NORTH AMERICA Who are we? 2 Our office located in Miami Lakes, FL
- 3. What our clients want to know… SAGE NORTH AMERICA • What 3 items to stock? How many? When to order more? • How do I track in-‐transit inventory and related landed costs? • How do I maximize space? • How do I store products to maximize efficiency (and minimize the cost of filling orders)? • How do I maintain accurate on-‐hand quanEEes? • How do I track and find my inventory?
- 4. 7 Inventory strategies towards be4er profits SAGE NORTH AMERICA 1. ForecasEng • Best pracOces and tools 2. Container Tracking • Tracking the supply chain 3. Landed Costs • “They promised my ERP system would handle costs, but it doesn’t? Why does it work for everyone else but me?” 4. Barcoding • How can a barcoding soluOon help? 5. Inventory Bin Locator Tracking • OrganizaOon of the warehouse 6. Order Fulfillment • Smoothing out the process 7. Mobile Sales • Empowering your sales team 4
- 5. 1. ForecasOng SAGE NORTH AMERICA 5
- 6. Why is forecasEng important? SAGE NORTH AMERICA For every 6 1% improvement in forecast accuracy, businesses experience a drop in inventory levels between 1% -‐ 2% Businesses can experience a 17-‐point average improvement in forecast accuracy when adopOng best pracOces and new technology As a result, firms can benefit from a 17% -‐ 34% reducEon in inventory simply by implemenOng a technology to help improve forecast accuracy. * Source: Triple Point Technology
- 7. CreaEng accurate forecasts. SAGE NORTH AMERICA • 7 How do you segment your customers? Do you sell domesOcally, or internaOonally? Do you sell to big-‐box retailers, or small mom-‐and-‐pop shops? Do you ship to mulOple markets from various warehouses? • Are you a wholesale distributor, or a manufacturer, or a combinaEon? If you are a manufacturer…do you consider yourself a MTS or MTO (Made to Stock vs. Made to Order) business? • Is your business seasonal? Do different products have different seasonal trends associated with them?
- 8. ForecasEng: Common threads SAGE NORTH AMERICA • You 8 have limited warehouse space • You need to pracOce “Just in Time” inventory, not “Just in Case” • Maximize limited space with the most profitable and best selling items • A,B,C ranking for replenishment
- 9. ForecasEng: Common threads SAGE NORTH AMERICA • Segment 9 your customers • Understand seasonality trends • Rank your items • No system is “perfect”
- 10. CollaboraEve ForecasEng SAGE NORTH AMERICA 10 EffecOve Inventory (www.effecOveinventory.com)
- 11. 2. Container Tracking SAGE NORTH AMERICA 11
- 12. Purchasing from overseas More and more companies are purchasing from SAGE NORTH AMERICA 12 overseas. Allows companies to purchase at reduced costs, but companies need to track import controls.
- 13. Container tracking SAGE NORTH AMERICA • U.S. 13 Customs • Harmonized Codes • www.exportcontrols.com • INCOTERMS • Bill of Lading • CIF
- 14. Container tracking SAGE NORTH AMERICA • Modify 14 PO Lines • Add fields for: • Container ID • Vessel • ETA • BOL • QuanOty Shipped • Receive into an “In Transit” Warehouse • Title transfer • Transfer goods from In Transit to Main warehouse
- 15. Container tracking SAGE NORTH AMERICA 15
- 16. 3. Landed Costs SAGE NORTH AMERICA 16
- 17. How much it cost to get it here? • TransportaOon SAGE NORTH AMERICA Landed Costs 17 costs • Insurance charges • DuOes • VAT • Customs assessments • Etc.
- 18. SAGE NORTH AMERICA Landed Cost 18 www.exportcompliance.com/landed-‐cost-‐calculator.html
- 19. 4. Barcoding SAGE NORTH AMERICA 19
- 20. SAGE NORTH AMERICA Barcoding • Inventory 20 accuracy • Faster and efficient receiving • Reduces errors when picking, packing and shipping • Quick inventory counts
- 21. SAGE NORTH AMERICA Barcoding 21
- 22. 5. Inventory Bin Level Tracking SAGE NORTH AMERICA 22
- 23. } Install a flexible material storage system that allows products to be stored to minimize the cost of filling orders } Label floor areas, aisles, shelving units, shelves } A bin is any designated storage locaOon ◦ Shelves ◦ Pallet racks ◦ Floor areas } With a good bin system, a new employee will be producOve on his/her second day of employment SAGE NORTH AMERICA © EIM, Inc. 23 Assign and Use Bin LocaEons
- 24. SAGE NORTH AMERICA • Fixed LocaOons • Random LocaOons • Holding Bins Make sure your material handling capabili6es can handle your peak level of ac6vity © EIM, Inc. 24 Three Types of Storage LocaEons
- 25. SAGE NORTH AMERICA • Space is reserved for a specific product • If the item is out of stock, the space remains empty, awaiOng the replenishment shipment • The “pick face” contains the fixed bin locaOons used to normally store products • A product can have mulOple fixed bins in a warehouse © EIM, Inc. 25 Fixed Bin LocaEons
- 26. 2nd Level 3rd Pallet Item #A100 SAGE NORTH AMERICA 3rd Level 2nd Pallet 02 01 04 03 06 05 02 01 04 03 06 05 1st Level 1st Pallet Aisle 1 Aisle 2 Aisle 3 © EIM, Inc. 26 Random Bin LocaEons What do random bin loca6ons require?
- 27. SAGE NORTH AMERICA Random Bins - Surplus Fixed Bins - Stock Fixed Bins - Stock Fixed Bins - Stock Fixed Bins - Stock Fixed Bins - Stock Random Bins - Surplus Fixed Bins - Stock Fixed Bins - Stock Fixed Bins - Stock Fixed Bins - Stock Fixed Bins - Stock Random Bins - Surplus Fixed Bins - Stock Fixed Bins - Stock Fixed Bins - Stock Fixed Bins - Stock Fixed Bins - Stock © EIM, Inc. 27 Random Bin LocaEons Used to Store Surplus Stock • Surplus stock is stored above pick face bins • Use erasable magne6c labels to designate the loca6on of surplus stock
- 28. SAGE NORTH AMERICA • Holding bins are used to store material that is not currently available to customers: – InspecOon – Returned Goods – Rework/Repair – Repackaging © EIM, Inc. 28 Holding Bins
- 29. Cates Products Jones Products Murphy Products Shipping, Staging and SAGE NORTH AMERICA Receiving Tubing and Brass Fittings Smith Products Plastic Fittings Chemicals Clairmont Products Bryer Products Wedge Products © EIM, Inc. 2 9 TradiEonal Warehouse Layout
- 30. "B" Ranked Items SAGE NORTH AMERICA "A" Ranked Items Shipping, Staging and Receiving "D" Ranked Items "C" Ranked Items Dead Stock Surplus and Bulk Storage © EIM, Inc. 30 Rank Based Storage Warehouse
- 31. SAGE NORTH AMERICA Shelving Units Poor Location Poor Location Prime Location Prime Location Fair Location Fair Location • IdenOfy most accessible bins in each storage secOon • Stock items with highest hits at eye level © EIM, Inc. 31
- 32. © EIM, Inc. SAGE NORTH AMERICA 32 Bin Locator System
- 33. 6. Order Fulfillment SAGE NORTH AMERICA 33
- 34. AccumulaOon of all of the costs involved in maintaining inventory in your facility – Cost of pukng away stock receipts and moving material within the SAGE NORTH AMERICA warehouse – Insurance on inventory – Rent and uOliOes for the porOon of your warehouse used to store material – Physical inventory and cycle counOng – Inventory shrinkage and obsolescence – Opportunity cost of the money invested in inventory © EIM, Inc. 34 Carrying Cost (“K” Cost)
- 35. Cost of Filling an Outgoing Order Includes • Labor associated with filling orders SAGE NORTH AMERICA • Cost of shipping supplies • % of the cost of capital improvements to the warehouse • % of the depreciaOon expense associated with warehouse equipment • % of warehouse insurance 3 5 © EIM, Inc.
- 36. Calculate the Cost of Filling an Order SAGE NORTH AMERICA • Total warehouse labor • The number of orders shipped during the past 12 months • The average number of line items on each customer order • The number of orders that can be filled per hour 3 6 © EIM, Inc.
- 37. Cost of Shipping Supplies • The annual cost of shipping supplies (boxes, bags, shipping tape, Styrofoam “peanuts”, etc.) is a direct expense for filling orders. The enOre amount is part of part of the cost of filling an order © EIM, Inc. SAGE NORTH AMERICA 37
- 38. Improvements, Equipment, and Insurance • DepreciaOon for warehouse improvements financed equipment and insurance have to be allocated among all warehouse funcOons. We typically use the same percentages derived from analyzing the division of labor. • 80% of warehouse labor is devoted to filling orders DescripEon Annual Cost 80% of the Cost Improvement DepreciaOon $20,000 $16,000 Insurance $3,700 $2,960 Financed Equip $4,620 $3,696 Total $22,656 SAGE NORTH AMERICA 3 8 © EIM, Inc.
- 39. SAGE NORTH AMERICA Time to Pick an Order • Acme has five full Ome pickers • There are 10,000 hours available to pick each year: – 8 hours per day * 250 work days * 5 Pickers = 10,000 hours • Five full Ome order pickers pick the 57,855 orders in the 10,000 hours • Average amount of Ome to fill an order: – 57,855 Orders ÷ 10,000 Orders = 5.78 Orders/Hour or (10.38 minutes per order) 3 9 © EIM, Inc.
- 40. SAGE NORTH AMERICA Time to Pick an Order • Time in moOon analysis showed that in filling an order: – 2/3 of the Ome is spent pulling material – 1/3 of the Ome is spent packing and staging the order 4 0 © EIM, Inc.
- 41. SAGE NORTH AMERICA • QuanOOes on stock receipts “tagged” to specific orders – Ensures that the right customer gets the product • Backorder availability report – Shows what backorders can be filled from current stock receipts • Minimizes material handling as orders can be filled on the receiving dock and sent to staging or shipping bypassing the warehouse storage area © EIM, Inc. 41 Cross Dock Whenever Possible
- 42. Order Bin Item Qty to Pick Qty Picked 12004 A-02-04-02 41-FS04 ¼” Flare Nuts 100 100 12012 A-02-04-02 41-FS04 ¼” Flare Nuts 25 25 12004 A-02-04-08 48-F04X04 ¼” x ¼” Male x Flare Connector 200 200 12016 A-03-06-06 49-F04X04 Male x Flare 90 Connector 15 15 SAGE NORTH AMERICA © EIM, Inc. 42 Wave Pick Sheet • Reduces “dead head” Ome • Pick mulOple orders at one Ome • Appropriate for numerous one and two line orders • Requires that orders be “assembled” during the packing process and that packing slips be printed in addiOon to pick Ockets
- 43. } Customer orders with mulOple lines are separated based on locaOon of the primary pick locaOon for each item ◦ Appropriate for large warehouses SAGE NORTH AMERICA © EIM, Inc. 43 Zone Picking
- 44. Full Physical Inventory vs. Cycle CounEng SAGE NORTH AMERICA • In a full physical all stocked products in a locaOon are counted at one Ome (usually once a year) • Some problems with a full physical inventory: – Time constraints and customer service (all acOvity must stop during count) – Counters may not be properly trained and may not have a vested interest in the goodness in the count – Even if physical is accurate, how long will it remain accurate? © EIM, Inc. 44
- 45. } Cycle counOng is the process of counOng part of your stock inventory, every day } Cycle counts usually result in more accurate computer stock levels than annual physical inventories } Without accurate stock levels, effecOve inventory management is impossible } Goal = 2% to 3% tolerance level SAGE NORTH AMERICA © EIM, Inc. 45 Make Cycle CounEng Part of Your Regular Business Procedures
- 46. } Bins/items with a large number of hits are counted more ouen } Every Ome someone goes to a bin to pull an order is another opportunity for a error or “unquality event” to occur } These items are more likely to have inaccurate quanOOes and should be counted more ouen. } Slow moving products usually have great accuracy and therefore can have an extended count cycle SAGE NORTH AMERICA © EIM, Inc. 46 Cycle Counts Based on Product Rank
- 47. SAGE NORTH AMERICA • Count “A” items six Omes a year • Count “B” items once or twice a year • Count “C”, “D” and “X” items once a year Best for maintaining accurate stock levels Consider adding high value and frequently pilfered items to the “A” group © EIM, Inc. 47 Cycle Count Rank Based on Hits
- 48. 7. Mobile Sales SAGE NORTH AMERICA 48
- 49. 49 SAGE NORTH AMERICA Mobile Salesforce
- 50. SAGE NORTH AMERICA Thank you QuesEons? Want to learn more? ralph@southeastcomputers.com 305-‐556-‐4697 50