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Ops Council – Turns &     Inventory    Management
Ops Council Charter, cont.Turns Management/Slow or Dead Inventory/Forward Buys/Strike Pricing Management Desired Effect En...
Inventory Reduction/Turns                                Management•   Maximizing Price Gains     – Monthly Strike Price I...
Inventory Reduction/Turns                                Management•   React immediately upon price change notification   ...
Turns•   A                5
Working Capital• This is A/P, A/R and Inventory• Cash Flow is generated by the following:• Reduce A/R- we get funds in qui...
INVENTORY TURNS• Inventory turns is simply the number of times we  cycle or turn our inventory per year.• Inventory turns ...
Improving Inventory Turns• What is the benefit of increasing inventory  turns?  – Financial Impact: less money spent - all...
Basic Questions• What is the minimum lead time as per the vendor?• What is the reliability of the vendor and/or trucker to...
Potential Hazards• Running out of Stock - affects customers and could  cause additional expense filling orders• Vendor Res...
Interest Expense – High/Low                                                    6.5%Budget 2006   Corp Park     MidAtl     ...
High/Low Expense• Example October: $1,466,103 @6.5% is  $7,330 (.065/364*28)• Example November: $2,170,603 @ 6.5% is  $10,...
HIGH/LOW FACTORS• Single Concept- less SKU’s, BKC 430 items- mostly TL,  but some LTL- we have worked with RSI to get  app...
Inventory Levels ReportMaines Paper & Food Service, Inc.Inventory Levels                                                  ...
Tools Needed to Improve Turns• Usage Report• Landed Cost Report - work with RSI to obtain  LTL rates rather than T/L prici...
Metro Turn Performance                Inventory Turns 2006605040302010 -     Jan Feb mar Apr May Jun   Jul   Aug Sept Oct ...
Inventory Management•   Printing the Stock Status Report:•   H&S Option 5 – Purchase Order Menu – enter•   Option 9 – Purc...
Stock Status Report PO09A11/05/07 10:13:51JJTRIOLACMP/DIV/LOC 12         1   1 WHS-   1 BUYER- 70 BEVERLY BLACKSTOCK STATU...
Excel Spreadsheet                      » POTATOES 901188 F-05-1A                                                    PLF’s ...
E3 Trim          20
Objectives   Maximize profits / margins   Minimal inventory levels   Zero out of stocks   Minimum exposure to loss   ...
Organization     Use a day planner or desk calendar•   Prioritize   Keep folders and bins for promotional items   Have a...
Purchase Order Process Holding bin or book for orders not yet confirmed Confirmations Files by date {1-31} Changes to ...
Work Together       w o rkin g as a tea m re a lly m a ke s a d iffere n ce                            P u rcha sing      ...
Team Work Produces:• Inventory control – timely adjustments, correct inventory• Receiving - timely receiving, orders here ...
Reports and Tools SIAR - sales inventory analysis report Items below min Items on order by item type Back in stock Pe...
SIAR Report5/18/07     5:49:17                          MAINES Paper & Food Service, Inc.MESIR1D Report # DWEND           ...
Items Below MinimumPO09G1 DARDEN DIRECT DISTRIBUTION, INC.5/21/07 5:19:36 ITEMS BELOW MINIMUM PAGE 1CMP/DIV/LOC 32 1 1 WHS...
Perishable Items Ordering•   Check the perishable items report that inventory    control emails daily for any issues with ...
Perishable Items Log                                                                   QualMaines #        Description    ...
Manual Order Sheet           :   14-May   15-May   16-May   17-May   18-May   18-MayDATE               Monday   Tues     W...
E3 OrderingBest Practice:E3 is our system for calculating orders using several factors such as   Sales, safety stock and v...
E3 Main MenuWorkstation ID QPADEV022L             11 Orders Placed      Orders                Itemsa     0 Short Shipments...
E3 Maintenance• Keep up to date with adding items and vendors to  the E3 system• Supercede items-old to new• Order Policy ...
Other Key Processes• Item maintenance (subs, deals)• Clean up : obsolete items/old open pos• Sometimes order less more oft...
Questions?     Call either of us, we would be glad to helpDarlene Passarelli: 301.543.1104Jenny Habura: 630.295.5134      ...
Features and Benefits of       Using E3       July 1st 2009                           37
In my opinion, E3 is the best tool Maines has given the               purchasing department:     •   To efficiently place ...
• E3 is designed to enable distributors to more profitably  anticipate and satisfy customer product demand.• Features of E...
• E3 Success comes from a strong set up of  both vendors and items.• 70% of using the system successfully is in  accurate ...
Vendor Setup Includes:•   Service Level goal•   Lead time quoted from vendor•   Lead time forecasted in days•   Lead time ...
Item Setup Includes:Setting the buyer class:1.   R for stock items2.   M for special orders3.   D discontinued            ...
• Reviewing history on demand forecasting  screen.  – New items (uninitialized) need to have a    starting forecast.  – Hi...
• Decide if the item history should be reviewed  weekly or every 4 weeks.   – Almost all of our items are set up to review...
Once every item in the vendor is reviewed andproperly set up, an Order Policy Analysis is run.• If there are multiple brac...
An Order Policy Analysis               needs to be run:• Each time a new vendor is set up• Any time there is a significant...
Replenishment Buying  Vendor Setup = 70% of successHistory Exceptions = 20% of successOther Maintenance = 10% of success  ...
Replenishment Buying Flow is• Vendor Setup > History Exceptions > Deals  = Correct Suggested Order Quantity• If this is fo...
Replenishment Buying             is the end result of•   Demand forecasting•   Lead time forecasting•   Order policy analy...
Demand EqualsShipped + Lost Sales – Promotional Sales                                           50
Demand Forecasting Patterns•   Smooth = less safety stock, low MADP•   Erratic = higher safety stock, higher MADP•   Trend...
Demand Forecasting• Each item has it’s own unique calculation• You can limit the amount of history used  to forecast an it...
Demand Forecasting has 3 Components1. Demand Forecast2. Item Deviation3. Seasonal Profile (if applicable)                 ...
History Exceptions … Concept is to manage                by exception• History exceptions are shown every Monday morning, ...
•                 Exception Screen    Demand Filter High•   Demand Filter Low•   Tracking Signal High•   Tracking Signal L...
It is important to remember that when reviewinghistory exceptions, you do not need to make achange, the system has already...
Lead Time Forecasting• Can be set at the vendor level• Can also be set at the item level … item level information  will al...
Order Policy Analysis• This balances the cost to buy with the cost to  carry• Every vendor will have a most profitable ord...
Service Level ManagementService levels drive safety stock needs, item by item3 types of items1. Stable2. Lumpy3. Super Lum...
Service Level Management• Higher service goals will drive safety stock  and inventory levels higher• Our system default is...
Key Components of Safety Stock•   Demand forecast•   Lead time•   Lead time variance•   Order Cycle•   Service level•   MA...
If all the information up to this point is                 correct …  Then daily buying simply   becomes replenishment,   ...
Daily Replenishment Buying• An order becomes due when enough items get at or below  the item order point resulting in serv...
Daily Buying .. How To• Sign on to the E3 To Do Menu• Set Data Base Selector to Buyer ID# and  Warehouse (company) #• Use ...
E3TRIM To Do MenuCompany       E3T MAINES PAPER AND FOOD SERVICEBuyer       010                                211814 Orde...
Select D Option to see the Orders that            should be placed todayBuyer   040                     Due OrdersWarehous...
Select the first vendor on the listDisplay Work Calculator       DR0B2009 05/21           Order Detail                   0...
There are 3 levels of an OrderOrder Detail Screen shows:• Viewing options• Rebuild options• Order accept keyItem Summary S...
You can accept the order as is or review all items on the order • Once you are comfortable with the order, go back   to th...
Next StepOrdersa      0 Short Shipments          • “A” order point items areb      0 Overdue                    items with...
Additional E3 Features•   Deals and Forward Buy Functions•   Promotional Functions•   Superceding Functions•   Super and S...
Deals and Forward Buy Functions• Setting up a Deal allows us to maximize any  additional discounts a vendor offers• It als...
Promotional Functions• This allows us to key in expected demand during a  promotional period and have the system order  th...
Superceding Functions• Superceding is a way to easily transfer  item demand from one item to another.  – For example, if a...
Super and Sub VendorsDot Foods is a good example of a Super Vendor• We order many different vendors on 1 purchase order  f...
Set Days of the Week Ordering•   E3 allows you to set the day of the week that a vendor shows up as a    due order     – T...
Set Weeks of the Year Ordering• Not commonly used but helpful if there is  a vendor that can only be picked up every  othe...
E3 Reports             78
Forecasting Accuracy ReportThis is the report we use:• Offers an overall report card of the accuracy of  last period’s dem...
• It does not take into account any changes we have  manually made in the demand forecast   – For example to gear up for a...
This is basically the only report we have used and isthe best tool to determine if the buyer is keeping upwith history exc...
82
Date      Buyer              Total Item Count   Forecasted     Actual Demand i n   % of E xpected                         ...
Other Reports Available Include:•   Lost sales analysis current and previous period      – Ranks items by lost dollars wit...
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Best Practice Documents•   etc                                    91
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Transcript of "Overview ops summit turns-inv management"

  1. 1. Ops Council – Turns & Inventory Management
  2. 2. Ops Council Charter, cont.Turns Management/Slow or Dead Inventory/Forward Buys/Strike Pricing Management Desired Effect Ensure the highest and best use of E3 Trim/SAP to maximize turns and price gains and lower inventory investment. Metric Market Gains Turn Inventory Company run rate improvement goal - $537,000 Technologies E-3 Trim SAP Corporate Chair Operations Chair Mike McCarthy Jon Mollman Members TBD 2
  3. 3. Inventory Reduction/Turns Management• Maximizing Price Gains – Monthly Strike Price Increases - Goal is to have 21-30 days on hand (depending on shelf life - Buyers need to be certain of Vendor price change rules > Is it by Order date, Ship date or Receipt date > Put in notes in E3 so anyone will know• Monthly Strike Price Decreases – Goal is to have 7 days or less on hand – Ensure Buyer reviews all future open PO’s and adjusts pricing 3
  4. 4. Inventory Reduction/Turns Management• React immediately upon price change notification - Need to meet Vendor lead times• Utilize relationship where you can – on late notification, still try to adjust PO’s• Understand which Vendors will push back or notify the Concept – push the limit, but within reason 4
  5. 5. Turns• A 5
  6. 6. Working Capital• This is A/P, A/R and Inventory• Cash Flow is generated by the following:• Reduce A/R- we get funds in quicker from our customers• Increase A/P- we hold onto our funds longer by stretching payments to our vendors• Maximize Inventory Turns - we bring in the minimum amount needed to service our customers, thereby holding on to capital. This creates value and allows us to use the funds for other business needs.- Just In Time Management of Inventory 6
  7. 7. INVENTORY TURNS• Inventory turns is simply the number of times we cycle or turn our inventory per year.• Inventory turns calculation: Divide the annual cost of sales by the average inventory level.• Example; Cost of Sales $36,000,000 Average Inventory for this time $6,000,000 equates to 6 Inventory Turns 7
  8. 8. Improving Inventory Turns• What is the benefit of increasing inventory turns? – Financial Impact: less money spent - allocation for other business needs – Reduced interest charge or carrying costs – Better utilization of Warehouse Capacity – Less chance of loss, damage or theft 8
  9. 9. Basic Questions• What is the minimum lead time as per the vendor?• What is the reliability of the vendor and/or trucker to make appointments?• What is the minimal safety stock needed? - Seasonality is a factor• Are there other items available as a substitute in an emergency? Can LTL be utilized?• What is the effect on price change income/buy-ins? - Do not want to sacrifice real $$’s• What is the back up plan if we run O/S? Can we pick up from a nearby center? 9
  10. 10. Potential Hazards• Running out of Stock - affects customers and could cause additional expense filling orders• Vendor Responsibility - we must hold vendors to their appointments, but we must also be held accountable for our errors and detention charges• Requirements to have promotional inventory on hand before the actual start date - SLO’s, toys• Balance buy-ins, i.e., Coke buy-in at year end - additional cost of carrying inventory versus the additional income generated from the buy-in 10
  11. 11. Interest Expense – High/Low 6.5%Budget 2006 Corp Park MidAtl West Metro Ohio Savage Memphis Chicago Corp Pk MidAtl West DSO Turn DSO Turn DSO TurnDecemberJanuary 33,588,723 2,855,635 3,771,469 1,469,004 3,226,186 4,706,626 3,391,602 7,556,650 21.25 17.13 6.09 59.78 10.31 35.31February 34,723,723 2,857,527 3,778,518 1,516,839 3,259,494 4,705,703 3,391,602 7,765,441 20.94 17.38 6.09 59.79 10.31 35.31March 36,142,513 2,977,680 3,923,939 1,647,426 2,978,941 4,734,918 3,374,512 7,724,751 20.88 17.43 6.09 59.78 10.31 35.31April 36,453,367 3,132,925 4,074,025 1,748,763 2,676,823 4,734,312 3,612,267 7,497,426 21.35 17.05 6.09 59.78 10.31 35.31May 38,636,223 3,467,750 4,351,155 1,905,671 3,044,246 4,815,364 3,612,267 7,845,363 21.13 17.23 6.09 59.79 10.31 35.32June 38,226,746 3,395,097 4,255,198 1,884,043 3,161,298 4,943,430 3,612,267 7,720,709 20.90 17.41 6.09 59.78 10.31 35.32July 38,924,770 3,250,918 4,113,038 1,794,155 3,269,621 4,888,509 3,721,577 7,568,244 21.29 17.09 6.09 59.78 10.31 35.31August 39,323,947 3,322,222 4,258,580 1,795,604 2,993,561 4,887,933 3,655,375 7,562,420 21.21 17.16 6.09 59.78 10.31 35.31September 38,040,347 3,282,174 4,195,052 1,811,219 3,053,058 4,760,736 3,655,375 6,900,952 21.51 16.92 6.09 59.78 10.31 35.31October 38,144,583 3,137,273 4,162,096 1,717,534 3,247,027 4,760,119 3,655,225 7,137,600 21.62 16.84 6.09 59.78 10.31 35.32November 37,333,347 3,145,417 4,162,227 1,741,556 3,460,517 4,702,284 3,655,225 7,461,599 21.37 17.03 6.09 59.78 10.31 35.32December 35,990,927 3,145,416 4,142,250 1,741,556 3,419,306 4,701,971 3,812,514 7,461,601 21.31 17.08 6.09 59.78 10.31 35.32Actual 2006December 37,065,606 4,834,796 5,086,260 1,981,958 3,966,218 5,397,582 3,979,857 8,647,089January 35,648,618 3,557,018 3,995,205 1,874,523 3,045,551 5,187,520 3,717,550 8,967,244 21.53 16.91 7.64 47.64 11.16 32.62February 36,429,433 3,318,542 4,048,103 1,589,141 3,168,316 4,901,682 3,563,371 8,255,885 21.46 16.96 6.88 52.94 10.99 33.13March 36,450,162 3,544,148 4,332,699 1,644,494 2,976,668 5,178,757 3,563,413 9,022,353 21.15 17.21 7.48 48.67 12.08 30.13April 36,776,168 3,207,843 4,521,198 1,594,539 2,899,598 5,048,260 3,207,632 8,951,015 21.90 16.62 6.58 55.31 12.17 29.91May 42,023,966 3,606,430 4,246,113 1,929,198 3,286,406 5,416,851 3,328,619 10,273,950 24.13 15.09 7.27 50.05 11.30 32.22June 37,665,312 3,544,835 4,630,711 1,637,462 3,260,155 5,108,097 3,707,244 8,620,027 21.85 16.66 7.49 48.61 12.49 29.15July 35,501,830 3,104,655 3,863,823 1,707,968 2,986,602 5,298,190 3,970,661 7,992,741 20.92 17.40 7.85 46.37 9.92 36.70August 36,524,349 2,691,342 4,134,566 1,765,247 2,927,249 4,784,638 3,539,829 7,171,254 19.04 19.12 6.13 59.38 10.26 35.49September 38,453,029 3,029,552 4,589,241 1,595,604 3,400,498 4,946,540 3,930,813 7,074,025 22.81 15.96 6.81 53.48 11.71 31.07October 36,212,853 3,383,675 4,291,142 1,466,103 3,284,398 4,914,064 3,499,495 7,923,221 20.88 17.43 6.97 52.24 10.44 34.85November 36,469,687 3,160,306 4,239,976 2,170,603 3,139,259 4,882,230 3,587,107 7,695,889 21.52 16.91 5.99 60.74 10.17 35.80December #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! 11
  12. 12. High/Low Expense• Example October: $1,466,103 @6.5% is $7,330 (.065/364*28)• Example November: $2,170,603 @ 6.5% is $10,853 (.065/364*28)• Additional cost of $3,523 or .0156 cents/case 12
  13. 13. HIGH/LOW FACTORS• Single Concept- less SKU’s, BKC 430 items- mostly TL, but some LTL- we have worked with RSI to get approval for more LTL’s due to less stores and usage• Multi- Concept- more SKU’s, possibility of duplication of items• Customer Needs- Westborough- forced to bring in containers from Italy for Bertuccis, no viable alternative. 13
  14. 14. Inventory Levels ReportMaines Paper & Food Service, Inc.Inventory Levels June JulyLocation Dec-05 Jun-06 Excess Inv Jul-06 Excess Inv Aug-06 3-Sep-06 10-Sep-06 17-Sep-06 23-Sep-06Corporate Park 37,065,606 37,665,312 1,481,154 30,828,420 1,300,788 30,528,003 31,444,151 29,988,640 31,301,792 32,103,874Alice Street 5,150,449 5,996,346 5,624,561 5,126,986 5,423,554 5,810,640Total Corporate 37,065,606 37,665,312 1,481,154 35,978,869 1,300,788 36,524,349 37,068,712 35,115,626 36,725,345 37,914,514Johnson City Ledger 692,909 814,819 814,819 905,306 905,306 905,306 905,306 905,306Syracuse Ledger 424,517 400,307 400,307 436,895 436,895 436,895 436,895 436,895Mid-Atlantic 4,834,796 3,544,835 - 3,104,655 210,287 2,691,342 3,234,339 2,989,806 3,403,701 2,976,804New England 5,086,260 4,630,711 42,166 3,865,782 43,954 4,134,566 4,675,477 4,232,285 4,562,372 4,643,432NY-Metro 1,981,958 1,637,462 638 1,708,710 963 1,765,247 2,126,996 1,630,653 1,952,542 1,855,227Ohio 3,966,218 3,260,155 6,251 2,986,602 6,444 2,927,249 3,247,802 3,312,124 3,135,496 3,156,260Maryland 5,397,582 5,108,097 43,399 5,298,190 33,237 4,784,638 5,157,681 4,949,091 5,129,735 5,000,237Memphis 3,979,857 3,707,244 17,038 3,970,661 16,539 3,539,829 3,743,940 3,429,354 3,406,154 3,133,575Chicago 8,647,089 8,620,027 78,033 8,010,482 48,267 7,171,254 7,564,606 7,439,831 7,408,812 7,287,732Total MPFS 72,076,793 69,388,968 1,668,678 66,139,077 1,660,479 64,880,676 68,161,755 64,440,972 67,066,359 67,309,982Change (8,200) W/E 9/23/06 Inv Turns Fcst Vrce to Budget Inventory Fcst Sep-06 Sep-06 Sep-06Corporate Park 16.92 37,042,075 (872,439)Alice StreetJohnson CitySyracuseMid-Atlantic 59.78 2,684,370 (292,433)New England 35.31 4,057,135 (586,297)NY-Metro 42.55 1,935,508 80,281Ohio 50.73 2,848,137 (308,123)Maryland 39.89 4,700,045 (300,192)Memphis 44.88 3,301,493 167,918Chicago 27.96 6,891,623 (396,108) 14
  15. 15. Tools Needed to Improve Turns• Usage Report• Landed Cost Report - work with RSI to obtain LTL rates rather than T/L pricing• Excel Worksheet 15
  16. 16. Metro Turn Performance Inventory Turns 2006605040302010 - Jan Feb mar Apr May Jun Jul Aug Sept Oct Nov 16
  17. 17. Inventory Management• Printing the Stock Status Report:• H&S Option 5 – Purchase Order Menu – enter• Option 9 – Purchase Report Option – enter• Select the Stock Status – Whs/ Buyer/Item• Select for W - Weekly 17
  18. 18. Stock Status Report PO09A11/05/07 10:13:51JJTRIOLACMP/DIV/LOC 12 1 1 WHS- 1 BUYER- 70 BEVERLY BLACKSTOCK STATUS WEEK/ THIS 1WK 2WK 3WK 4WK CSQTY ALLQT NETQT MINBL AVERAG WEEK AGO AGO AGO AGOPACK SIZE UPC/VND_ITM ITEM_DESCRIPTION___________TIHI_ _AVERAG _MARKE 1 1050 675258056057CARTON MULTI FS 24.79 25.8200 25.620 228 29 615 308 154.0 107 139 184 153 165 17182 B/KING 408 25.8200 26.480 1 500 CT 675258056044CARTON BREAKFAST FS 13.93 19.1300 18.880 106 6 140 60 30.2 21 18 29 37 35 5898 B/KING 805 19.1300 19.570 1 250 CT 675258056064CARTON 2 CUP CARRIER FS 19.00 11.9100 11.750 129 49 656 457 228.3 148 222 257 223 227 4768 B/KING 808 11.9100 12.180 1 500 CT CTN FRY ROUND KING 10.42 17.1400 17.310 105 21 372 170 85.1 56 91 93 75 90 17591 B/KING 612 17.1400 17.690 241 57 940 541 270.3 176 248 343 265 269 1 2000 CT CTN FRY ROUND MEDIUM 27.99 40.9600 41.440 17590 B/KING 607 40.9600 42.300 138 26 472 240 120.0 68 114 138 114 129 1 1200 CT CTN FRY ROUND LARGE 23.22 34.0200 34.440 17573 B/KING 508 34.0200 35.130 1 600 CT CTN CHKN FRIES LARGE NEW 22.78 38.6800 38.910 110 26 348 202 101.0 75 92 122 88 109 17840 B/KING 411 38.6800 39.540 18
  19. 19. Excel Spreadsheet » POTATOES 901188 F-05-1A PLF’s Percent of• ON HAND RECEIVING ON HAND SALES 48/PAL freezer capacity• 12/11/06 1829 1152 2981 1503 62.10 12.40• 12/12/06 1478 1152 2630 968 54.79 10.94• 12/13/06 1662 1152 2814 1289 58.63 11.70• 12/14/06 1525 1152 2677 1654 55.77 11.13• 12/15/06 1023 2304 3327 1337 69.31 13.83• 12/16/06 1990 1152 3142 1642 65.46 13.07• 12/18/06 1500 1152 2652 1503 55.25 11.03• 12/19/06 1149 1152 2301 968 47.94 9.57• 12/20/06 1333 1152 2485 1289 51.77 10.33• 12/21/06 1196 2304 3500 1654 72.92 14.55• 12/22/06 1846 1152 2998 1337 62.46 12.47• 12/23/06 1661 2304 3965 1642 82.60 16.49• 12/25/06 2323 0 2323 1503 48.40 9.66• 12/26/06 820 1152 1972 968 41.08 8.20• 12/27/06 1004 1152 2156 1289 44.92 8.97• 12/28/06 867 1152 2019 1654 42.06 8.40• 12/29/06 365 1152 1517 1337 31.60 6.31• 12/30/06 180 1152 1332 1642 27.75 5.54• 01/01/07 (310) 0 (310) 1503 (6.46) (1.29)• 01/02/07 (1813) 0 (1813) 968 (37.77) (7.54)• 01/03/07 (2781) 0 (2781) 1289 (57.94) (11.56)• 01/04/07 (4070) 0 (4070) 1654 (84.79) (16.92)• 01/05/07 (5724) 0 (5724) 1337 (119.25) (23.80)• 01/06/07 (7061) 0 (7061) 1642 (147.10) (29.36) 19
  20. 20. E3 Trim 20
  21. 21. Objectives Maximize profits / margins Minimal inventory levels Zero out of stocks Minimum exposure to loss Maximize E3 ordering 21
  22. 22. Organization Use a day planner or desk calendar• Prioritize Keep folders and bins for promotional items Have a daily routine and stick to it Set up folders in outlook Get email addresses for vendors & back up for out of office Update vendor survey regularly 22
  23. 23. Purchase Order Process Holding bin or book for orders not yet confirmed Confirmations Files by date {1-31} Changes to date or quantity Price changes- contracts 23
  24. 24. Work Together w o rkin g as a tea m re a lly m a ke s a d iffere n ce P u rcha sing In ven to ry con trol R e ce iving C u sto m er se rvice T ra nsp o rta tiona p po intm en ts p ro m o tio ns b a ckh a u ls 24
  25. 25. Team Work Produces:• Inventory control – timely adjustments, correct inventory• Receiving - timely receiving, orders here on correct date• Customer Service – some customers wont participate in promos, auto shipments effect sales- prevents obsolete inventory• Trans. – product here for shipping from backhauls, money saved by picking up 25
  26. 26. Reports and Tools SIAR - sales inventory analysis report Items below min Items on order by item type Back in stock Perishable items log Manual order worksheet 26
  27. 27. SIAR Report5/18/07 5:49:17 MAINES Paper & Food Service, Inc.MESIR1D Report # DWEND Sales Item Inventory Analysis ReportWENDYS UNITS 4 4 3 Days R=ReceivedItem # Description Label Week Weeks Weeks Last This Weekly B.O.H. on D=Due Usage Ago Ago Week Week Demand Hand P/O # Cases Date930447 POTATO BAKER WRAPPED 80 CT PACKER 5212 1391 1390 1373 1058 1303 137 1 226656 D 320 5/18/07 POTENTIAL PROBLEM 846- P/O DUE930824 DRESS ITALIAN VINAIG WENDYS 303 105 110 81 7 76 7 1 225173 R 60 4/13/07 POTENTIAL PROBLEM 69-930020 BEEF PATTY 8/1 RED 2OZ GRND WENDYS 6081 1708 1625 1533 1215 1520 277 1 226458 D 3005/18/07 POTENTIAL PROBLEM 943- P/O DUE P/O DUE 226459 D 200 5/19/07 P/O DUE 226625 D 300 5/21/07 P/O DUE 226626 D 300 5/22/07 27
  28. 28. Items Below MinimumPO09G1 DARDEN DIRECT DISTRIBUTION, INC.5/21/07 5:19:36 ITEMS BELOW MINIMUM PAGE 1CMP/DIV/LOC 32 1 1 WHS- 1BUYER- 90 JENNY HABURAPACK SIZE ITEM_DESCRIPTION_ ACTUAL MARKET CSQTY ALLQT WTD 1WK 2WK 3WK 4WK 5WK NEXT PO/QTY ITEM_#6 88 OZ ARTICHOKES QUARTERED 40.30 40.30 6 1 1 2 3 4 1 4 5/25/07 4 9440301035 OZ RICE CARNAROLI 24.10 24.10 30 10 8 48 66 59 54 42 5/25/07 140 943567VENDOR # VENDOR NAME VENDOR PH/FAX115455 AMERICAN ROLAND 212-741-8290 28
  29. 29. Perishable Items Ordering• Check the perishable items report that inventory control emails daily for any issues with rotation and dates• Run Items on order report for today’s sales quantities• Record sales on manual order worksheet and decide what is needed• Place purchase orders manually or thru E3 29
  30. 30. Perishable Items Log QualMaines # Description Required Dates Slot # Date(s) of Product Count H&S Diff ity Must be received w/12 days.930097 Chicken 8 pc BIC Fresh 10-000A 41cs- 5/21/07; 38cs- 5/22/07 79 79 0 Store must get 7 days. Must be received w/8 days930019 Beef Patty 4 oz, 4/10# 10-007A 700cs- 5/16/07 547cs 5/17/07 1247 1251 -4 Stores must have 4 days Must be received w/8 days930020 Beef patty 2 oz, 4/10# 10-015A 104cs- 5/16/07; 500cs- 5/17/07 604 604 0 Stores must have 4 days Must be received w/14 days 208cs- 5/19/07; 400cs- 5/21/07; 900cs-930131 Frosty Mix, 1/5 gal 10-021A 1508 1511 -3 Stores must have 5 days 5/22/07 Must be received w/14 days 88cs- 5/19/07; 450cs- 5/21/07; 800cs-930927 Frosty Mix Vanilla, 1/5 gal 1338 1333 5 Stores must have 5 days 5/22/07 30
  31. 31. Manual Order Sheet : 14-May 15-May 16-May 17-May 18-May 18-MayDATE Monday Tues Wed Thurs Friday SunItem #Moyer 652 Sat p.u OH930019 800 700 1300 700 700 800 Due n4oz beef 815 726 850 965 1055 715 Sold 637 611 1061 796 441 526 Bal > 195 OH930020 200 300 400 300 300 2002oz beef 270 218 274 346 398 268 Sold 125 207 333 287 189 121 Bal 31
  32. 32. E3 OrderingBest Practice:E3 is our system for calculating orders using several factors such as Sales, safety stock and vendor requirements• If the information is correct the orders will be correct• Safety stocks – depends on customers needs, warehouse space and sales fluctuations• Clear out exceptions every Monday - * this is key to catch increases or decreases in sales.• Use the notes function for increases and decreases to items 32
  33. 33. E3 Main MenuWorkstation ID QPADEV022L 11 Orders Placed Orders Itemsa 0 Short Shipments n 475 Exceptionsb 0 Overduec 0 Alternate Sourced 7 Due q 30 Overstocke 0 Forward r 9 Out of Stockf 0 Planned s 0 Lost Salesg 0 Bookedh 0 Transfer u 63 Uninitialized Itemsi 0 Back Ordersj 0 Order Point Ak 0 Order Pointl 0 Buyer Order Point y Kit To Do Menum 105 All Orders z Utility Menu 33
  34. 34. E3 Maintenance• Keep up to date with adding items and vendors to the E3 system• Supercede items-old to new• Order Policy Analysis 34
  35. 35. Other Key Processes• Item maintenance (subs, deals)• Clean up : obsolete items/old open pos• Sometimes order less more often• Weekly and monthly price changes 35
  36. 36. Questions? Call either of us, we would be glad to helpDarlene Passarelli: 301.543.1104Jenny Habura: 630.295.5134 36
  37. 37. Features and Benefits of Using E3 July 1st 2009 37
  38. 38. In my opinion, E3 is the best tool Maines has given the purchasing department: • To efficiently place orders quickly and accurately • To maximize on all deals and price increases • To identify fast or slow trending items • To manage our inventory • To service our customers at the high levels that they have come to expect from Maines. 38
  39. 39. • E3 is designed to enable distributors to more profitably anticipate and satisfy customer product demand.• Features of E3 most commonly used at Maines include: – History exception program – New item information – Seasonal forecasting functions – Deal program – Superceding functions – Reserve item functions – Ti Hi ordering functions 39
  40. 40. • E3 Success comes from a strong set up of both vendors and items.• 70% of using the system successfully is in accurate vendor set up. 40
  41. 41. Vendor Setup Includes:• Service Level goal• Lead time quoted from vendor• Lead time forecasted in days• Lead time variance %• Buying bracket(s) - can be set by dollars, cases, weight, cube or pallets and if there are multiple brackets available, the discounts can be added and the system will calculate which bracket is the most profitable 41
  42. 42. Item Setup Includes:Setting the buyer class:1. R for stock items2. M for special orders3. D discontinued 42
  43. 43. • Reviewing history on demand forecasting screen. – New items (uninitialized) need to have a starting forecast. – History on an item can be filtered or adjusted to account for promotional activities, opening orders, etc. – Determine if the item is seasonal. If so a seasonal profile can either be created or copied from a similar item 43
  44. 44. • Decide if the item history should be reviewed weekly or every 4 weeks. – Almost all of our items are set up to review weekly, split cases are set up to review every 4 weeks.• Setup item minimum order information. – This allows us to have E3 automatically order the product in our warehouse Ti/Hi quantities as well as set a minimum purchase. For example, we sell 100 cases of an item per week. The pallet holds 10 cases, we would set this item up to order a buying multiple of 10 with a minimum quantity of 100. 44
  45. 45. Once every item in the vendor is reviewed andproperly set up, an Order Policy Analysis is run.• If there are multiple brackets set up, E3 will determine the most profitable bracket.• Once this is accepted, we are ready to place an order with the supplier. 45
  46. 46. An Order Policy Analysis needs to be run:• Each time a new vendor is set up• Any time there is a significant change in business with the vendor (adding or losing volume or items)• At least once every 6 months• When inheriting a vendor from another buyer 46
  47. 47. Replenishment Buying Vendor Setup = 70% of successHistory Exceptions = 20% of successOther Maintenance = 10% of success 47
  48. 48. Replenishment Buying Flow is• Vendor Setup > History Exceptions > Deals = Correct Suggested Order Quantity• If this is followed, the suggested order quantity is always mathematically correct. 48
  49. 49. Replenishment Buying is the end result of• Demand forecasting• Lead time forecasting• Order policy analysis• Service level management 49
  50. 50. Demand EqualsShipped + Lost Sales – Promotional Sales 50
  51. 51. Demand Forecasting Patterns• Smooth = less safety stock, low MADP• Erratic = higher safety stock, higher MADP• Trending = keeping up with current trends• Seasonal = Predictable, repetitive peaks of demandMADP = Mean Absolute Deviation expressed as a percentage … In other words how much does an item deviate from the forecast.Ranges are:• 0-25% stable• 26-49% moderate• 50% and up erratic 51
  52. 52. Demand Forecasting• Each item has it’s own unique calculation• You can limit the amount of history used to forecast an item 52
  53. 53. Demand Forecasting has 3 Components1. Demand Forecast2. Item Deviation3. Seasonal Profile (if applicable) 53
  54. 54. History Exceptions … Concept is to manage by exception• History exceptions are shown every Monday morning, based on the previous week’s sales• Items show up based on preset company control factors, these are the settings we use: 5% Demand Filter High 3% Demand Filter Low 35% Tracking Signal Limit 54
  55. 55. • Exception Screen Demand Filter High• Demand Filter Low• Tracking Signal High• Tracking Signal Low• Service Level Check• Infinity Check• Watch Items• Seasonal Items• New Items 55
  56. 56. It is important to remember that when reviewinghistory exceptions, you do not need to make achange, the system has already done that.It is simply showing you the items that areexceptions and since you may know something thesystem doesn’t about the item, it allows you tocorrect the forecast. 56
  57. 57. Lead Time Forecasting• Can be set at the vendor level• Can also be set at the item level … item level information will always override the information at the vendor level• It is important that this information is accurate since as much weight is placed on lead time as on demand when calculating the suggested order quantity• Lead time and lead time deviation will impact when you buy as well as safety stock so it is important to keep it accurate. 57
  58. 58. Order Policy Analysis• This balances the cost to buy with the cost to carry• Every vendor will have a most profitable order frequency• Once established, this is the order cycle• However, Every vendor is checked every night and the order will come “due” on need, Not based on days since bought 58
  59. 59. Service Level ManagementService levels drive safety stock needs, item by item3 types of items1. Stable2. Lumpy3. Super Lumpy – Some items can be corrected with seasonal forecasts (like ice melt or charcoal). 59
  60. 60. Service Level Management• Higher service goals will drive safety stock and inventory levels higher• Our system default is 97% 60
  61. 61. Key Components of Safety Stock• Demand forecast• Lead time• Lead time variance• Order Cycle• Service level• MADP 61
  62. 62. If all the information up to this point is correct … Then daily buying simply becomes replenishment, not buying 62
  63. 63. Daily Replenishment Buying• An order becomes due when enough items get at or below the item order point resulting in service jeopardy for the vendor line.• Every item is analyzed every night• An order is built for each vendor each night (even non-due orders)• Items reaching their order point ahead of the rest of the line will prompt as Order Point Checks• Due orders MUST be bought daily• Suggested order quantities should not be changed, component information should be fixed instead 63
  64. 64. Daily Buying .. How To• Sign on to the E3 To Do Menu• Set Data Base Selector to Buyer ID# and Warehouse (company) #• Use easy to navigate work flow starting at the top left corner “Due Orders”. The left side of the screen are the Order Categories 64
  65. 65. E3TRIM To Do MenuCompany E3T MAINES PAPER AND FOOD SERVICEBuyer 010 211814 Orders Due in DollarsWarehouse 001 6185 Orders Placed in $sWorkstation ID QPADEV0257 1 Orders Placed Orders Itemsa 0 Short Shipments n 1858 Exceptionsb 0 Overduec 0 Alternate Sourced 19 Due q 118 Overstocke 1 Forward r 65 Out of Stockf 0 Planned s 0 Lost Salesg 0 Bookedh 0 Transfer u 0 Uninitialized Itemsi 2 Back Ordersj 2 Order Point Ak 11 Order Pointl 0 Buyer Order Point y Kit To Dom 88 All Orders z Utility Menu 65
  66. 66. Select D Option to see the Orders that should be placed todayBuyer 040 Due OrdersWarehouse 001 Vendor Sb Vendor Name Wg Whs St Amount Dela 206875 DAYMARK 001 1 3595 3b 231600 02 DURO BAG 001 1 7648 0c 378000 JET PLASTICA 001 1 8259 0d 630760 01 PRAIRIE 001 1 93540 0e 721500 1 SOLO STOCK 001 1 3335 5 66
  67. 67. Select the first vendor on the listDisplay Work Calculator DR0B2009 05/21 Order Detail 09:49:38Buyer 040 3 DelayVendor 206875 DAYMARKWarehouse 001 2009 05/14 Last Order Date Independent Auto Adj Final Adj Totals Bracket 3,596 3,596 3,596 Dollars 1 1 511 511 511 Eaches 2 0 Maximum 300 300 300 Weight 3 1,000 Minimum 31 31 31 Cube 4 0 Up to Max 43 43 43 Dozen 5 1 Unit 79 79 79 Cases 6 .000 Discount % 82 82 82 Layer 7 0 Bkt Pricing Opt 43 43 43 Pallets 8 0 Discount Pass On 511 511 511 Gallons 9 0 Savings PerOrder Checks 0 Savings Pass On a 2 AOP d 33 MANL b 2 OP c 16 NEW5 Rebuild 6 Accept 7 Prt PO 8 All Itms 9 SOQ Itms 10 Clr Ord 23Trk Spl 67
  68. 68. There are 3 levels of an OrderOrder Detail Screen shows:• Viewing options• Rebuild options• Order accept keyItem Summary Screen shows:• Items and suggested order quantities• Helpful codes such as N or W• This is where any manual special order items will be added to the order.(browse when needed, buyers do look at this screen prior to accepting an order)Item Detail Screen shows:• Full details of how the system got the suggested order quantity(should only be viewed when needed and if all set up is correct that should be rarely) 68
  69. 69. You can accept the order as is or review all items on the order • Once you are comfortable with the order, go back to the Order detail screen and accept the order. • Order approval screen allows you to set pick-up information • Each due order is handled the same way until the list is completed 69
  70. 70. Next StepOrdersa 0 Short Shipments • “A” order point items areb 0 Overdue items with service levelc 0 Alternate Source above 98%d 6 Due • J and K items are belowe 0 Forward their respective orderf 0 Planned points but the vendor lineg 0 Booked has not yet met theh 0 Transfer vendor order point … thisi 0 Back Orders is a quick way to seej 4 Order Point A items you may run out ofk 3 Order Point that can be added to anl 0 Buyer Order Point open order and thatm 79 All Orders might have a jump in sales during the week 70
  71. 71. Additional E3 Features• Deals and Forward Buy Functions• Promotional Functions• Superceding Functions• Super and Sub Vendor• Set days of the week ordering• Set weeks of the year ordering 71
  72. 72. Deals and Forward Buy Functions• Setting up a Deal allows us to maximize any additional discounts a vendor offers• It also allows us to buy-in on a price increase or when a vendor gives us extended terms• Our system is set up to cap the buy at 42 days and it will place the order as late as possible. 72
  73. 73. Promotional Functions• This allows us to key in expected demand during a promotional period and have the system order the product based on the extra demand.• E3 will also filter the added demand out of the forecast so not to increase inventory after the promotion.• This does not work well for long promotions, since it buys all the increased demand at one time – It is better to manually increase the forecast for long promotions and then adjust the promotional use out at the end. 73
  74. 74. Superceding Functions• Superceding is a way to easily transfer item demand from one item to another. – For example, if a customer changes their specifications from 1 item or supplier to another, we can transfer the history from the original item over to the new item. – There is also a calculator in the program that allows for case pack differences. 74
  75. 75. Super and Sub VendorsDot Foods is a good example of a Super Vendor• We order many different vendors on 1 purchase order from the created “super” vendor.• By creating this link in E3 it allows us to track our purchases by the individual vendor as well as maintain item information at the vendor level in the AS400 side of our system.Some suppliers have multiple shipping warehouses.• These suppliers are set up in E3 as Sub Vendors.• This allows us to separate items according to the shipping locations and place individual orders by location. 75
  76. 76. Set Days of the Week Ordering• E3 allows you to set the day of the week that a vendor shows up as a due order – This function is helpful for suppliers that are either backhauled or have set pick-up days with our logistic carriers – It is also helpful for vendors where we have set ordering days of the week, like DOT. – Each of these types of orders need to be reviewed since E3 will build an order for that day of the week whether you need to place it or not. – This function should not be used unless it is absolutely necessary to place an order on a certain day of the week. It can lead to additional inventory. (we once had a buyer here who had 50 vendors so he set up his data base to order 10 vendors a day) 76
  77. 77. Set Weeks of the Year Ordering• Not commonly used but helpful if there is a vendor that can only be picked up every other week• Can set for even or odd weeks of the year• Normally is set up in addition to set day of the week option 77
  78. 78. E3 Reports 78
  79. 79. Forecasting Accuracy ReportThis is the report we use:• Offers an overall report card of the accuracy of last period’s demand forecast.• It displays expected demand versus actual demand during the most recent period.• The report shows the actual sales dollars achieved vs. the sales dollars expected based on forecast and a ration between actual and expected. 79
  80. 80. • It does not take into account any changes we have manually made in the demand forecast – For example to gear up for a new customer or gear down for loss of an account• It can be run by buyer and for the company as a whole• It should be run each week and then totaled by the month to get a clearer picture of how each buyer is doing• The ideal number is 100% the normal range is 90-95 or 105-110%. – If the differences that are larger than forecast should be analyzed. 80
  81. 81. This is basically the only report we have used and isthe best tool to determine if the buyer is keeping upwith history exceptions and their item demands, whichis the most important maintenance for accurate E3ordering.This is a sample of the report and recap of theforecasting accuracy report information I have kept inthe past 81
  82. 82. 82
  83. 83. Date Buyer Total Item Count Forecasted Actual Demand i n % of E xpected Demand in $ $ DemandAugust Jim Pope 1271 881193.33 900595.33 102.19August Denise Barry 1214 718499.67 675580.00 94.1August Deb Spirito 1171 569604.00 609288.33 106.98August Jeff Dietrick 1167 7591590.00 790239.00 104.11August Becky Roberge 1361 703250.00 678134.67 96.29August Matt Deane 943 284169.67 293381.00 103.27August Jack Loomis 804 630524.33 681212.00 108.13August Brenda Hull 581 3363285.00 3065601.00 91.2August Scott Leveille 24 25465.00 26586.00 104.3August Cheryl Ashton 863 370054.00 334780.00 90.49August Julie Deprato 474 2167508.00 2097425.00 96.76Aug Co 1 9874 10472710.00 10152822.33 99.81 83
  84. 84. Other Reports Available Include:• Lost sales analysis current and previous period – Ranks items by lost dollars with biggest problems at the top – These are potential lost sales based on the current forecast, not actual AS400 lost sales• On hand overstock current and previous period• Inventory accuracy current and previous period – Valuable when determining the inventory impact of varying service levels using theoretical inventory values and %.• Service accuracy – Displays one column for every service level goal set and what was attained by system class• SOQ vs actual purchase quantity – This is a daily report that would need to be run by buyer which shows any item that the buyer changed the E3 suggested order quantity. The most recent E3 upgrade also shows this information on the buyer order detail screen• Service level analysis – System calculated in stock % that would be most desirable 84
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  91. 91. Best Practice Documents• etc 91
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