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Inventory Management For Small And Medium Businesses


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As businesses struggle with the impact of a declining economy, they need to turn internally to improvements in managing their assets and operate their enterprises efficiently by reducing waste and eliminating costly non-value added activities. One of the areas core to business success is efficient and effective management of their inventory. Using the APICS Body of Knowledge, best practices, and his experience as a leading Supply Chain Management expert, he fuses the various components into PARTS (Processes, Accuracy, Resources, Tools, and Strategy) to help guide millions of business owners. You won’t want to miss this innovative session which optimizes a business’ greatest asset.

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Inventory Management For Small And Medium Businesses

  1. 1. By Tim Salaver, MBA, PMP, CSSMBB President, APICS Golden Gate Chapter President, Cornerstone Systems Solutions
  2. 2. Why is Inventory Important? <ul><li>Write 3 reasons </li></ul><ul><li>Poll the reasons </li></ul><ul><li>Prioritize the reasons </li></ul><ul><li>Discuss the reasons </li></ul>
  3. 3. Good Customer Experience <ul><li>Determines customer satisfaction levels </li></ul><ul><li>Creates loyalty </li></ul><ul><li>Defines the customer relationship </li></ul><ul><li>Drives revenue growth </li></ul><ul><li>Requires Best Practice Inventory Management </li></ul><ul><li>Is Traditional and Online </li></ul>
  4. 4. Bad Customer Experience <ul><li>Drives away customers </li></ul><ul><li>People remember vividly </li></ul><ul><li>Caused by poor training </li></ul><ul><li>Result of poor inventory management practices </li></ul><ul><li>Has greater publicity </li></ul><ul><li>“ Satisfied Customers Tell Three Friends, </li></ul><ul><li>Angry Customers Tell 3,000” </li></ul>
  5. 5. What is a Small and Medium Business? <ul><li>What is your perception? </li></ul><ul><li>How large is an SMB? </li></ul><ul><li>What is the Annual Revenue or Asset Base? </li></ul><ul><li>How Many Employees? </li></ul><ul><li>Small Business Administration Definition (source: </li></ul><ul><ul><li>is organized for profit; </li></ul></ul><ul><ul><li>has a place of business in the United States; </li></ul></ul><ul><ul><li>makes a significant contribution to the U.S.  economy by paying taxes or using American products, materials or labor; and, </li></ul></ul><ul><ul><li>does not exceed the numerical size standard for its industry </li></ul></ul>
  6. 6. Industry Group Size Standard Manufacturing 500 employees Wholesale Trade 100 employees Agriculture $750,000 Retail Trade $6.5 million General & Heavy Construction (except Dredging) $31 million Dredging $18.5 million Special Trade Contractors $13 million Travel Agencies $3.5 million (commissions & other income) Business and Personal Services Except: $6.5 million Architectural, Engineering, Surveying, and Mapping Services $4.5 million Dry Cleaning and Carpet Cleaning Services $4.5 million
  7. 7. SBA Size Standards (sample) <ul><li>Table of Small Business Size Standards Matched to North American Industry Classification System Codes (source: serv_sstd_tablepdf.pdf) </li></ul><ul><li>492110 Couriers and Express Delivery Services 1,500 EE </li></ul><ul><li>423210 Furniture Merchant Wholesalers 100 EE </li></ul><ul><li>541512 Computer Systems Design Services $25.0M </li></ul><ul><li>622110 General Medical and Surgical Hospitals $34.5M </li></ul><ul><li>522110 Commercial Banking $175 million in Assets </li></ul><ul><li>111333 Strawberry Farming $0.75M </li></ul><ul><li>111336 Fruit & Tree Nut Combination Farming $0.75M </li></ul>
  8. 8. Think P.A.R.T.S. <ul><li>Processes </li></ul><ul><li>Accuracy </li></ul><ul><li>Resources </li></ul><ul><li>Tools </li></ul><ul><li>Strategy </li></ul>
  9. 9. Inventory Processes <ul><li>Capstone to Inventory Management </li></ul><ul><li>Every company has an inventory process </li></ul><ul><li>For Better or Worse </li></ul><ul><li>Need to address customer’s demands appropriately </li></ul><ul><li>Services inventory processes are not so easily defined as in Manufacturing </li></ul>
  10. 10. Inventory Management Procure-to-Pay (aka Req-to-Check) Strategy Processes Accuracy Resources Tools
  11. 11. Inventory Management Quote-to-Cash (AKA Order-to-Cash) Process Accuracy Resources Tools Strategy
  12. 12. Inventory Quote-to-Cash Procure-to-Pay Quote-to-Cash
  13. 13. Customer Satisfaction is #1
  14. 14. The dreaded responses <ul><li>“ We don’t carry that item” </li></ul><ul><li>“ We have it in a different color” </li></ul><ul><li>“ We can order it for you. It should be here in 2 weeks.” </li></ul><ul><li>“ I don’t know” </li></ul><ul><li>“ I thought we had it on the floor” </li></ul><ul><li>“ Let me check the warehouse, the system seems to be down” </li></ul><ul><li>“ It shows we have 2, but I know we have more than that in the warehouse” </li></ul><ul><li>“ We ran out earlier in the day, sorry about that” </li></ul><ul><li>“ I’m sorry for the wait, a big party just came in.” </li></ul>
  15. 15. Service versus Manufacturing <ul><li>Skills </li></ul><ul><li>Knowledge </li></ul><ul><li>Information </li></ul><ul><li>Menus </li></ul><ul><li>Content </li></ul><ul><li>Blogs </li></ul><ul><li>Entertainment </li></ul><ul><li>QUALITY </li></ul><ul><li>PRESENTATION </li></ul><ul><li>Parts </li></ul><ul><li>Sub-assemblies </li></ul><ul><li>Raw Materials </li></ul><ul><li>In-progress </li></ul><ul><li>Finished Goods </li></ul><ul><li>Items </li></ul><ul><li>Options </li></ul><ul><li>QUALITY </li></ul><ul><li>PRESENTATION </li></ul>
  16. 16. Inventory Accuracy <ul><li>Not an Option </li></ul><ul><li>Expected </li></ul><ul><li>Company Valuation </li></ul><ul><li>How often do you count and value inventory? </li></ul><ul><li>Is key to meeting customer service levels </li></ul>
  17. 17. Inventory Resources <ul><li>Trained </li></ul><ul><li>Skilled </li></ul><ul><li>Equipped </li></ul><ul><li>Managed </li></ul><ul><li>Informed </li></ul><ul><li>Capable </li></ul><ul><li>Motivated </li></ul><ul><li>Capacity </li></ul>
  18. 18. Inventory Tools <ul><li>Hand Held Technology </li></ul><ul><li>Information Systems </li></ul><ul><li>Point 0f Sale </li></ul><ul><li>Warehouse Management System </li></ul><ul><li>Online Ticketing </li></ul><ul><li>Online Ordering </li></ul><ul><li>Configurator systems </li></ul>
  19. 19. Inventory Strategy <ul><li>Why Last? </li></ul><ul><li>Because SPART isn’t a good acronym to remember  </li></ul><ul><li>To create a workable and executable inventory strategy requires knowing what processes, accuracy, resources, and tools are available </li></ul><ul><li>Focused </li></ul><ul><ul><li>“ Kitchen Nightmares” with Chef Gordon Ramsey </li></ul></ul><ul><ul><li>“ Tabatha’s Salon Takeover” with Tabatha Coffey </li></ul></ul><ul><li>Aligns to Corporate Objectives and Strategy </li></ul>
  20. 20. What Happens <ul><li>When PARTS Work </li></ul><ul><li>When PARTS Don’t Work </li></ul><ul><li>Higher Customer Satisfaction </li></ul><ul><li>Greater Profitability </li></ul><ul><li>Decreased Waste </li></ul><ul><li>Lower Shrinkage </li></ul><ul><li>Less Item Obsolescence </li></ul><ul><li>Efficiencies </li></ul><ul><li>Effective Product Management </li></ul><ul><li>Greater value to the customer </li></ul><ul><li>Lower Customer Satisfaction </li></ul><ul><li>Lower Profits </li></ul><ul><li>Increased Waste </li></ul><ul><li>Higher Shrinkage </li></ul><ul><li>More Item Obsolescence </li></ul><ul><li>Inefficiencies </li></ul><ul><li>Poor Product Management </li></ul><ul><li>Higher costs to the customer </li></ul><ul><li>Loss of Business </li></ul>
  21. 21. What is Inventory Really?
  22. 22. <ul><li>Create a Watch Retail Company </li></ul>
  23. 23. <ul><li>Questions, Comments….What else do you wanna know?? </li></ul><ul><li>Tim Salaver, MBA, PMP, CSSMBB </li></ul><ul><li>[email_address] </li></ul><ul><li>702-286-7464 </li></ul>
  24. 24. Additional Resources <ul><li>Arnold, CFPIM, CIRM, J. R. Tony, Stephen N. Chapman, CFPIM, and Lloyd M. Clive, P.E., CFPIM. Introduction to Materials Management. 6th ed. Upper Saddle River: Prentice Hall, 2007. </li></ul><ul><li>Brooks, Roger B., and Larry W. Wilson. Inventory Record Accuracy: Unleashing the Power of Cycle Counting. New York: John Wiley & Sons, 1995. </li></ul><ul><li>Mercado, Ed C., CPIM, C.P.M. Hands-on Inventory Management. Boca Raton: Auerbach Publications, 2007. </li></ul><ul><li>Novak, Stephen, CPIM, CIRM, CQMgr. The Small Manufacturer's Toolkit: a Guide to Selecting the Techniques and Systems to Help You Win. Boca Raton: Auerbach Publications, 2006. </li></ul><ul><li>Piasecki, David J. Inventory Accuracy: People, Processes, & Technology. Kenosha: OPS, 2003. </li></ul><ul><li>Wild, Tony. Best Practice in Inventory Management. 2nd ed. New York: John Wiley & Sons, 1997. </li></ul><ul><li>Fundamentals of Inventory Control, version 2.4. Chicago: APICS The Association for Operations Management, 2002. </li></ul><ul><li>Fundamentals of Operations Management, version 2.1. Chicago: APICS The Association for Operations Management, 2002. </li></ul><ul><li>Fundamentals of Materials Handling and Warehousing. Operations Management Education and Research Institute of Canada (OMERIC), 1999. </li></ul>