This document outlines a two-day course on costing and inventory management using Excel. Day 1 covers underlying MRP principles, inventory forecasting, bills of materials, and Excel modeling. Day 2 focuses on template construction, stock aging reports, and Excel skills like functions and formulas. Key concepts discussed include target inventory levels, safety stock, materials requirements planning, bills of materials, routings, and using Excel functions to analyze inventory data.

1. Costing by ExcelDick Lam Jan 2010Back to Basic

2. Course RationaleDetail + Logic => Flexibility

3. Course OutlineDay 1 - amUnderlying principles of MRPForward-looking of inventory forecastBOM & RoutingTakt time on labor requirementExhibition of Excel ModelsDay 2 (Template Construction)MRP Fine Tuning templateStock Aging ReportConclusionDay 1 – pm (Excel skill training)SpecialExcel functions introduction

4. User-defined functions introduction

5. BOM & Routing worksheet model

6. Simple MRP calculationSorry!I am not JIT (Just in time) expertI am a spreadsheet worker who is working on detail, building spreadsheet model, constructing formula, pulling data from “ERP” system and giving instructionI always argue with our IT for detail working – Excel, please

7. DisenchantmentI am an accountant but,I found that some concepts in accounting are not applicable in inventory managementInventory Turnover, Inventory DaysInventory ForecastRatio analysisBefore the above realization, I often got dissonance with our operation people until a day, I learnt Excel and their functions & programming

8. RealizationMindset of working in detailAll calculation must have workingsAll workings must have evidenceAll evidence must have its milieuAll milieu must have its assumptions and objectives

9. Back to BasicthenBuild from Scratch

10. Basic FormulaOpening + In – Out = ClosingOpening + Purchase – Sold = ClosingPurchase = Closing – Opening + SoldClosing = Summation of Units to be sold of future days covered by Target Inventory Days

11. Before doing anything

12. Let’s start the jigsaw puzzle

13. Example - II

14. Excel LibraryInventory by weeksstkweeks, wstkbalInventory by daysstkdays, dstkbalHow to install library?Additional: dcdays, dcbal

15. Example - I

16. Target Inventory Days/WeeksIn inventory perspective, it is the cushion to handle any fluctuation of future demandIt asserts that inventory balance should be various on the future demandIt is also the tolerance of cash being held up in terms of inventory

17. Another perspectiveBy setting 3 weeks of target inventory weeks, you pull in the requirement inventory 3 weeks well in advancee.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 weeksRefer to worksheet example

18. Condition for settingMagnitude of fluctuationLead timeTolerance of cash hold up

19. Safety Stock LevelHow do you define it?It is the estimated consumption of a certain period of time to cater for any fluctuation of demand happen at any point of timeShould it be based on past experience or future demand?Can we prove it?

20. What should be MRP?BOM MaterialsBut what should be included in BOM?All precious itemsAll items in piecesAll packing materials?All consumables? (but what is consumables?)All tools?All needs to be measured!!

21. Critical to reduce StockShort lead time by supplierEqualize MOQ to SPQ Minimize SPQMore accurate forecast (!!)Frequency of deliveryLead time offered to your customers / Width of frozen window

22. MRP Fine TuningPurposeSpot out the following problemsAbnormal balanceReveal Shortage to trigger pull-inReveal Excessive Stock to trigger push-outInsufficiency of inventory balance

23. MRP Fine TuningAssumption8 Weeks of Inventory to monitorHK WH takes time to ship to PRC WHAvailable Qty = WH Qty – Reserved QtyOverdue P/O Qty not considered3 weeks of requirement as Safety Inventory Level

24. MRP Fine TuningData to highlightHK WH & PRC WH Qty < 0Available Qty < 01st week requirement consumes HK WH QtyWeekend Qty < next week requirementExcessive QtyAlready excessive with additional P/O QtyWith P/O Qty, it is excessive

25. BOM & Routing

26. BOMFor simplicity, we only focus on single level BOMWe only concern about the quantity after normal scrap specified in BOMWe assume the unit of measure of RM in BOM same as warehouse SKU

27. Materials DemandUsing the demand forecast for the materials requirementApplying basic formula for the purchase of materialsPurchase = Closing – Opening + SoldThis purchase forecast is on a weekly basis

28. RoutingIt is the flow of productionIt is based on workstations which specify the labor hours to complete every task of the assembly processIt is related to Takt time in optimization

29. Routing - ProblemsLabor Cost / Man HoursInefficiencyLow Season / Fluctuation

30. Stock Aging ReportAssume FIFO, first in first out for the incoming materialsCategorize inventory in order to sort out the focusFocus on the irregular pattern of incoming transaction – it should be leaning to right

31. Special Excel functionsRange NameOperator: &, $min, maxvlookup(key, range, column, true/false)MatchIferror(formula, value)Index(range, row, column)Indirect(cell.address)sumif, sumproduct

32. TipsIndex > vlookupRemember the use of $Great value of “&”When using “indirect”, reference to the original formulaBatch total & check sumRefresh your memory

33. Conditional Formatting