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Materials Management and Inventory OptimizationArticles, Pod Casts and Videos |
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Our website contains links to more than 80 articles, pod casts and videos. All we ask is that you register your details to access our articles. Access is FREE.
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Videos
Survey Reveals Five Factors for Spares Management Success Tutorial: The Out of Stock Metric Tutorial: Slow Moving Inventory Tutorial: The Optimization Trap Part 1 Tutorial: The Optimization Trap Part 2 Tutorial: The Optimization Trap Part 3 Tutorial: 5 Myths of Inventory Reduction Case Study: Industrial Supplies Inventory Optimization Case Study: Materials and Spares Inventory Management Case Study: Stocking Policy for Materials & Spare Parts Management Case Study: Steel Industry Spares Inventory Optimization Case Study: Power Station Spares Inventory Optimization Plus many more...
Materials and Spares Inventory Storage Guidelines
Storage Guideline #1: Hydraulic Hoses Storage Guideline #2: V-Belts Storage Guideline #3: Bearings Storage Guideline #4: Motors Storage Guideline #5: Lubrication & Hydraulic Fluids Storage Guideline #6: Seals
Managing Slow Moving Inventory Slow moving inventory is often seen as an easy target for people undertaking an inventory review. Rather than undertake a structured review process (such as the Inventory Cash Release process) many people will target slow moving inventory as if it is some kind of silver bullet for inventory optimization.
Inventory Management - Knowing the Formulae is the Easy Part! Does it really matter if you do or do not understand all the formulae that are used in inventory management? Does it matter if you know or don’t know how to calculate the Reorder Point or the Reorder Quantity for individual SKUs? How many people do you know that don’t bother to learn these formulae when they use software to manage inventory?
Squirrel Stores & Why You Would Be Nuts To Keep Them Breaking the locks was the only option. It was 2am and Line 1 had stopped completely. The good news was that we knew exactly what the problem was and how to fix it. We also knew that the spare part we needed had been in the storeroom earlier in the day – I had seen it there myself. The bad news was that it was no longer there and we didn’t know who had taken it or where they put it. We were pretty sure that one of the dayshift crew had taken it and put it in his locker.
The Spares Stocking Policy Companies these days are awash with policies. They have environmental policies, safety policies, purchasing policies, contract management policies, audit policies, corporate policies, expense policies, travel policies, maintenance policies, some even have internet usage and blogging policies. With all this corporate ‘red tape’ why would you need (or want) one more policy? The answer to this question lies in the benefits you get in return.
Cracking the Inventory Code Understanding which inventory solution suits your situation can be tricky and mistakes can be costly in both time and money. This paper describes four 'home truths' that you can use to navigate this minefield and crack the inventory code. Presented at the International Maintenance Conference 2008 (Bonita Springs).
When is Critical Really Critical? Engineers will happily (well, not happily) review items that are not classified as critical but which actually are critical. Yet they will shy away from reviewing items that are officially defined as critical. In this case any review is, therefore, driven by the classification rather than the opportunity or cost benefit. Nobody would use this approach in reviewing any other capital investment.
Is Your Storeroom a Pit stop or a Supermarket? Recently I was visiting a facility with a very large spare parts storeroom. While walking through and understanding their issues it actually felt like I was in the local supermarket rather than in the storeroom of a high tech manufacturing facility. By that I mean that there were long aisles that were not clearly marked, high use materials were not always near the user’s entry/exit, and there were boxes in the aisles waiting to be unpacked. To make the picture complete there was even a maintenance guy walking up and down one aisle saying, ‘Where do they keep the #%&*?! pump gaskets!’.
It's All in the TimingWhen it comes to inventory, companies seeking to reduce their inventory often only decide to act when there is an obvious problem. This is usually driven by the impending inventory review for the end of the fiscal year, end of quarter or even the end of the month.
Inventory - Cash or Carry? There is an old saying in business that ‘Cash is King’. Inventory, no matter what type, ties up cash and diverts it from other uses. Therefore the aim of inventory management should be to minimize the inventory investment for a particular customer service level. The approach taken should ensure that the target level of service is met while also minimising the cash investment.
Inventory Management - One Size Does Not Fit All If there is one great myth in inventory management it is that one single technique will solve all inventory problems. Not that people believe that one technique will solve all problems in all situations but that in any given company one approach is all that is required to manage all inventory. For the inventory manager this is very attractive as it means that there is only one approach to manage. For the software vendor, consultant or advisor it means only one solution to sell.
World’s Best Practice Inventory Management In almost every endeavour it is difficult to determine what constitutes ‘best practice’. Businesses around the world spend millions of dollars on software and advisory services and often don’t know whether they are ‘best practice’ or just somewhere in the pack.
Why Your Current Approach To Inventory Management Is Not Best Practice And Is Costing You Money Inventory management is the combination of know-how, process, measures and reporting that together provide the opportunity for maximizing availability while minimizing cash investment. There are five reasons why your inventory management is not best practice and is costing you money.
Do you hold too much inventory? Check your stock turn ratio It is essential to measure the availability of stock, after all that is why the investment is made in the first place. However, measuring stock outs can be a limiting way to measure inventory as it only measures one dimension of inventory, that is, availability.
Better Practice Inventory Management People are always searching for ‘best practice’, somehow believing that there is a silver bullet solution that will cure their inventory problems. The problem, of course, is that what is best practice in one country/industry/business might not be best practice in another. In any case, the exalted ‘best’ practice might just be too much of a jump for many people to take or indeed may not be economically viable.
The Importance of Day One Decisions For many companies their inventory really is the forgotten investment and this is especially the case with engineering inventory. These companies may expense their inventory or many not have in place any system to manage their inventory. In this case the issue is not ‘optimization’, these companies are faced with the challenge of setting up an inventory management system.
How Does Your Inventory Management Sound? Engineering materials and spares management is one of the truly cross functional activities that an organization needs to manage. Each of the disciplines involved can and does have a significant influence on your materials and spares inventory outcomes. While this influence can come from them working away doing their jobs in isolation, for an ideal outcome each of these disciplines must work in concert with each other – kind of like an orchestra.
Inventory Optimization Articles
The activity of changing the way a business is managed, of course, involves optimization. Optimization is what managers do; optimization equals solving problems by trading off choices to achieve the best outcome. In this respect it is a key means for companies to improve their operations. But optimization is all about understanding constraints. To solve a problem you must understand the constraints.
Why MRO Inventory Optimization Doesn't Optimize Part 1 So, you have finally got hold of that software you have been looking for. The boss has been on your back about inventory and wants your assurance on availability while also reducing the cash investment. You researched the market and decided on a program of inventory optimization. Optimization, surely that is what you need, after all optimization is the ultimate outcome, is it not? Optimization means that everything is working at maximum efficiency, right? Wrong.
Why MRO Inventory Optimization Doesn't Optimize Part 2 In Part 1 we identified that what is generally referred to as inventory optimization really doesn’t optimize inventory. Before identifying what does truly optimize we need to first understand the short falls in the process.
Why MRO Inventory Optimization Doesn't Optimize Part 3 To truly optimize inventory a new process is required and the suggested process is known as the Inventory Cash ReleaseTM Process. The first step in applying this process is to focus on the SKUs that will have a real impact on the inventory value, not the long tail of inventory items that hold little dollar value. This is an application of the Pareto Principle. The next step is to apply the ‘7 Actions for Inventory Reduction’ – and there are only 7 actions! Now, in Part 3, we discuss steps 3 and 4.
Inventory Process Optimization White Paper optimization of MRO and engineering spares inventory has, for many years, been a goal of inventory managers, operations managers and financial managers. The problem is that, until now, the techniques that have been applied to achieve optimization do not result in a truly optimal outcome. When subject to critical analysis the reasons for this become quite obvious. Note that this paper includes marketing content!
Implementation & Change Management Articles
Business As Usual - Do You Really Want It? There is no doubt that the current economic times are not ‘business as usual’ but is that what we really want? Is ‘business as usual’ a good thing?
Are You Paying Attention? If you are really going to have an influence on your company’s materials and inventory management there are moments that require 100% attention. The problem, however, is that you will never really know which moments they are!
Capability, Courage and Culture In any program of cost reduction or continuous improvement there are three things that the leadership team need to understand for success. Put simply these are capability, courage and culture.
Can Your Plans Be Executed? In almost all businesses we spend much of our time planning. We develop strategic plans, we develop business plans, we develop annual budgets, we develop sales plans and we develop plans for specific projects. Sometimes, we develop plans 'in case of emergency'. For example, evacuation plans. In these latter plans we know that we need to test the plan and so we hold fire and evacuation drills.
Implementation is Everything The real issue that the survey exposes is the lack of implementation that actually takes place in business. Many studies and analyses are conducted but not enough gets implemented.
What is Your Sphere of Influence? Have you ever attended a sporting event or theatrical performance? Most of us have. At some time have you been sitting there when someone else starts applauding or gets up to give a standing ovation? Ever noticed what happens when people do this?
Are You Invested in Maintaining the Status Quo? One of the major hurdles that is faced in any business improvement initiative is the loyalty that is felt towards the existing way of doing things. How often have you heard someone say 'We've being doing it like this for years'! We all know that, as a rule, people hate change and when it is as extreme and obvious as the 'we've been doing it this way' comment it is easy to recognize this resistance. However, sometimes it is not so obvious.
It’s All About Process In professional sport these days it is not unusual to hear players and coaches talking about process. They talk about focusing on the process and following the process. Rarely do they talk about scoring a goal, a touchdown, a home run, a point or achieving a good shot. It’s all about process.
The Process of Implementation (Part 1) Up until now you may have been involved in an interesting intellectual and analytical exercise. The development of an action plan has enabled you to crystallize your thoughts and put some substance around your ideas. However, all of that will count for little if you do not take the next step and implement.
The Process of Implementation (Part 2) Change management requires an understanding of the human issues faced by you and your team. That’s right, implementation is a human process not a scheduling processes. Planning and scheduling are tools that help manage the human process; they do not replace it.
Operations Management & Improvement Articles
Accuracy Vs. Precision Performance measurement is the cornerstone of all improvements efforts. If you don’t or can’t measure where you are now versus where you were before, then how do you know if you have improved? Just as importantly, however, is knowing if your measure actually reflects your current position or the issue that you are trying to highlight or control.
Be Careful What You Ask For! We have probably all heard the old saying ‘what’s measured, matters’ or a derivation of that saying. What this means is that we pay attention to the things that are measured and that it is these measures that drive our behaviour… or more importantly, the behaviour of our team.
Are You Biased? The behaviors that are evident in the stock market are also evident in the day to day decisions that are made in management. In the world of finance this irrational behavior is known as a behavioral bias. That is, sometimes people make irrational decisions rather than base their decisions on some measurable, sound foundation.
What To Do In a Crisis As consumer sentiment declines and people spend less, companies all over the world are feeling the effect of lower sales and/or lower margins. This of course flows on to a tightening of budgets in all areas of operations. So what can you do in such a crisis?
Don’t Confuse Information With Expertise Recently I have attended a number of conferences and events that have led me to question some of the advice that people are being given by so called experts. Every where we go these days there is someone claiming to be an expert advisor or consultant and if you don’t know the background of these people then you just may be getting bad advice.
The Four Keys to Success What does the high achiever do to achieve superior results? I think that it can be boiled down to just four key activities.
Four Requirements of Persistence Recently I was discussing inventory reduction with a regional director of a globally famous company. During our conversation this director made the following observation: ‘We are really good at developing a plan and really poor at implementing it – it is a major weak point for us’. Upon reflection I suspect that it is a weak point for many more companies than his!
Goal Setting Most articles that you read on goal setting will tell you how important goals are; they will repeat clever acronyms (S.M.A.R.T) to remind you about goal setting; they often give data on how many people fail to achieve their goals. Today I am going to tell you why, in my opinion, most goal setting advice is completely wrong.
Going For Gold It was while watching a young Australian standing on the dais accepting her gold medal that it occurred to me that at one level the Olympics is one large benchmarking exercise! For each event, and on their given day, the athletes are benchmarked against their peers. The strongest or fastest receive a gold medal and everyone else understands where the pinnacle of achievement in their sport now is.
Can You Be a Gold Medal Winner? A few seek advanced knowledge, they seek a deeper understanding of the requirements, they seek many different experiences in their chosen field, they read books, some even write books and attain the status as ‘an expert’. But this doesn’t make them gold medalists! Let’s call these people silver medalists. So, what does it take to be a gold medalist in operations management and operations improvement?
Occam’s Razor William Occam was a Franciscan Friar in 14th Century England and is attributed with developing a principle that states that ‘the explanation of any phenomenon should make as few assumptions as possible, eliminating those that make no difference in the observable predictions of the explanatory hypothesis or theory’. OK, so that is a mouthful and the principle is often paraphrased as "All other things being equal, the simplest solution is the best."
Taking it One Step at a Time Recently I visited the Kennedy Space Center (KSC) at Cape Canaveral, Florida USA. To many this is better known as the place from which the Space Shuttle is launched. During this visit I was reminded of the words of Neil Armstrong as he took that historic first step on the moon. He said ‘One small step for man, one giant leap for mankind’.
Are You a Supervisor or a Manager? No, I am not asking about your job description, I am asking about your leadership style. You see I am a firm believer in the expression: Management’s role is to change the way a business is managed, not manage it day to day*. What does this mean?
Creating a Sustainable Cost Advantage Recently a group called the Economist Intelligence Unit (EIU) produced a report titled Rethinking Cost Structures: Creating a Sustainable Cost Advantage. To produce this report the EIU surveyed 427 senior executives across a range of industries from around the world.
Where Are Your Black Swans? The black swan is a rare and unique bird, so unique in fact that it is found, in the wild, in only one place – Australia. The most interesting thing about the Black Swan is however that it was not discovered until 1726. Up until that time the entire world believed that Swans were only one color – white. In fact up until that time a reference to a black swan was a metaphor for something that did not exist.
Is It The Symptom or Problem? Recently I wrote an article titled “What’s Your Problem” about identifying who owns the problems that are encountered and the impact of this on finding and implementing solutions. Sometimes there are tremendous opportunities for improvement within companies but those that recognize the opportunity may not own the problem. In many cases nothing gets done and the benefit is never realized.
Will Today's Success Be Tomorrow's Failure? Rather than sit back and just enjoy the ride, now is the time for businesses to be thinking seriously about their cost structures and working capital investment. When the cycle turns, as it inevitably will, they do not want to be caught out. By ignoring these issues right now many businesses may be setting themselves up for a bigger fall than may be necessary.
Making the Unreasonable Reasonable Every so often people raise with me the issue of setting ‘unreasonable’ or ‘unscientific’ goals. This is where ‘the boss’ mandates that costs, inventory, overtime or some other measure must be reduced or improved by some apparently arbitrary amount. The complaint, of course, is that the target is ‘unscientific’ and not based on any analysis. The goal setter apparently picks a target that suits some other non operational agenda.
Urgency Vs. Emergency Ever worked in a place where everything is urgent? Where everything must be completed by yesterday? Where deadlines are always looming or past? I am sure that many of us have but what is it that separates those with a sense of urgency and those that work with a culture of emergency?
What’s Your Problem? As you would expect I am asked to help solve all sorts of different business and operational problems. Whenever I do get involved there is an approach that I take to ensure that the problem is defined before we design the solution. The approach is to work on the diagnosis so that the problem is defined, not just the symptoms.
Who Owns the Problem? To my surprise the people in the organization that I am dealing with have decided to shelve undertaking a project to realize these gains for at least 9 months and maybe a year. The reason? Nobody owns the problem!
Why Cost Reduction Efforts Fail Every business is trying to improve profitability, after all this is why the business exists. To achieve this goal there are only two paths that can be taken – increase revenue or reduce costs.
Double Loop Your Thinking Many organizations go down a path of operational improvement and find that either their improvement is slow and incremental or that they run out of ideas. There may be several reason for this, however, a major reason is likely to be the ‘mental models’ that they bring to their business improvement efforts. To achieve significant and sustainable improvements in business the people designing and driving the effort need to employ double loop thinking.
Apply the Fundamentals With Rigor Significant improvements can be achieved by applying known and proven management solutions with discipline. There is generally little or no need to ‘reinvent the wheel’ and without the discipline to follow through, half implemented solutions are unlikely to drive results.
10 Steps to a Lower Cost Business (Part 1 of 4) Laying the Foundation for a Lower Cost Business (Part 2 of 4) Optimizing Your Performance - 10 Steps to a Lower Cost Business (Part 3 of 4) Renewal and Development - 10 Steps to a Lower Cost Business (Part 4 of 4) This series of articles explains what you can do to achieve lower costs and operational excellence in your business. Click on individual links above.
A Business Meta Fore! Many professional golfers go on to develop successful and significant business interests. Greg Norman is a standout example of this. Many senior business leaders play golf at a high level. This link between success at golf and successful business may not be coincidental, the attributes required for both are very similar.
The following pod casts are taken from a series of interviews completed for Business Essentials in 2005/06/07
The 5 Myths of Inventory Reduction Interview Phillip explains how looking at you inventory as an investment can create a different perspective and enable an effective inventory reduction. Often companies cannot make this change because they are held back by myths that prevent action. (Run time 6:13)
Finding the Hidden Profit in Your Business (Run time 6:52)
Part 1: Laying the Foundation (Run time 8:05) Part 2: Optimizing Performance (Run time 6:19) Part 3: Renewal and Development (Run time 5:30) The above three interviews explain our approach to continuous improvement.
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