Costing By Excel - Jan 2010


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Costing By Excel - Jan 2010

  1. 1. Costing by Excel<br />Dick Lam Jan 2010<br />Back to Basic<br />
  2. 2. Course Rationale<br />Detail + Logic =&gt; Flexibility<br />
  3. 3. Course Outline<br />Day 1 - am<br />Underlying principles of MRP<br />Forward-looking of inventory forecast<br />BOM & Routing<br />Takt time on labor requirement<br />Exhibition of Excel Models<br />Day 2 (Template Construction)<br />MRP Fine Tuning template<br />Stock Aging Report<br />Conclusion<br />Day 1 – pm (Excel skill training)<br /><ul><li>SpecialExcel functions introduction
  4. 4. User-defined functions introduction
  5. 5. BOM & Routing worksheet model
  6. 6. Simple MRP calculation</li></li></ul><li>Sorry!<br />I am not JIT (Just in time) expert<br />I am a spreadsheet worker who is working on detail, building spreadsheet model, constructing formula, pulling data from “ERP” system and giving instruction<br />I always argue with our IT for detail working – Excel, please<br />
  7. 7. Disenchantment<br />I am an accountant but,<br />I found that some concepts in accounting are not applicable in inventory management<br />Inventory Turnover, Inventory Days<br />Inventory Forecast<br />Ratio analysis<br />Before the above realization, I often got dissonance with our operation people until a day, I learnt Excel and their functions & programming<br />
  8. 8. Realization<br />Mindset of working in detail<br />All calculation must have workings<br />All workings must have evidence<br />All evidence must have its milieu<br />All milieu must have its assumptions and objectives<br />
  9. 9. Back to BasicthenBuild from Scratch<br />
  10. 10. Basic Formula<br />Opening + In – Out = Closing<br />Opening + Purchase – Sold = Closing<br />Purchase = Closing – Opening + Sold<br />Closing = Summation of Units to be sold of future days covered by Target Inventory Days<br />
  11. 11. Before doing anything<br />
  12. 12. Let’s start the jigsaw puzzle<br />
  13. 13. Example - II<br />
  14. 14. Excel Library<br />Inventory by weeks<br />stkweeks, wstkbal<br />Inventory by days<br />stkdays, dstkbal<br />How to install library?<br />Additional: dcdays, dcbal<br />
  15. 15. Example - I<br />
  16. 16. Target Inventory Days/Weeks<br />In inventory perspective, it is the cushion to handle any fluctuation of future demand<br />It asserts that inventory balance should be various on the future demand<br />It is also the tolerance of cash being held up in terms of inventory<br />
  17. 17. Another perspective<br />By setting 3 weeks of target inventory weeks, you pull in the requirement inventory 3 weeks well in advance<br />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<br />Refer to worksheet example<br />
  18. 18. Condition for setting<br />Magnitude of fluctuation<br />Lead time<br />Tolerance of cash hold up<br />
  19. 19. Safety Stock Level<br />How do you define it?<br />It is the estimated consumption of a certain period of time to cater for any fluctuation of demand happen at any point of time<br />Should it be based on past experience or future demand?<br />Can we prove it?<br />
  20. 20. What should be MRP?<br />BOM Materials<br />But what should be included in BOM?<br />All precious items<br />All items in pieces<br />All packing materials?<br />All consumables? (but what is consumables?)<br />All tools?<br />All needs to be measured!!<br />
  21. 21. Critical to reduce Stock<br />Short lead time by supplier<br />Equalize MOQ to SPQ <br />Minimize SPQ<br />More accurate forecast (!!)<br />Frequency of delivery<br />Lead time offered to your customers / Width of frozen window<br />
  22. 22. MRP Fine Tuning<br />Purpose<br />Spot out the following problems<br />Abnormal balance<br />Reveal Shortage to trigger pull-in<br />Reveal Excessive Stock to trigger push-out<br />Insufficiency of inventory balance<br />
  23. 23. MRP Fine Tuning<br />Assumption<br />8 Weeks of Inventory to monitor<br />HK WH takes time to ship to PRC WH<br />Available Qty = WH Qty – Reserved Qty<br />Overdue P/O Qty not considered<br />3 weeks of requirement as Safety Inventory Level<br />
  24. 24. MRP Fine Tuning<br />Data to highlight<br />HK WH & PRC WH Qty &lt; 0<br />Available Qty &lt; 0<br />1st week requirement consumes HK WH Qty<br />Weekend Qty &lt; next week requirement<br />Excessive Qty<br />Already excessive with additional P/O Qty<br />With P/O Qty, it is excessive<br />
  25. 25. BOM & Routing<br />
  26. 26. BOM<br />For simplicity, we only focus on single level BOM<br />We only concern about the quantity after normal scrap specified in BOM<br />We assume the unit of measure of RM in BOM same as warehouse SKU<br />
  27. 27. Materials Demand<br />Using the demand forecast for the materials requirement<br />Applying basic formula for the purchase of materials<br /><ul><li>Purchase = Closing – Opening + Sold</li></ul>This purchase forecast is on a weekly basis<br />
  28. 28. Routing<br />It is the flow of production<br />It is based on workstations which specify the labor hours to complete every task of the assembly process<br />It is related to Takt time in optimization<br />
  29. 29. Routing - Problems<br />Labor Cost / Man Hours<br />Inefficiency<br />Low Season / Fluctuation<br />
  30. 30. Stock Aging Report<br />Assume FIFO, first in first out for the incoming materials<br />Categorize inventory in order to sort out the focus<br />Focus on the irregular pattern of incoming transaction – it should be leaning to right<br />
  31. 31. Special Excel functions<br />Range Name<br />Operator: &, $<br />min, max<br />vlookup(key, range, column, true/false)<br />Match<br />Iferror(formula, value)<br />Index(range, row, column)<br />Indirect(cell.address)<br />sumif, sumproduct<br />
  32. 32. Tips<br />Index &gt; vlookup<br />Remember the use of $<br />Great value of “&”<br />When using “indirect”, reference to the original formula<br />Batch total & check sum<br />Refresh your memory<br />
  33. 33. Conditional Formatting<br />
  34. 34. Get Data from Database<br />
  35. 35. Indicate if certain condition is met to highlight<br />It can be a compound formula<br />Not to have so many<br /> color combination<br />