1. inventory mgmt

Let us Start againLet us Start againLet us Start again

Inventory ManagementInventory Management

IV. INVENTORY MANAGEMENTIV. INVENTORY MANAGEMENT

4.1 4.1 JIT LogisticsJIT Logistics

• Sell One Buy One Concept

• Stocking Policy

4.24.2 Inventory Control ParametersInventory Control Parameters

4.3 4.3 MIP Setting & OrderingMIP Setting & Ordering

Just in Time parts Logistics is the essence of Inventory control at Toyota.

Inventory Control

Order cycle Reduction

Receiving Heijunka Order

Order Placing - Parts ReceivingL/T Reduction

JIT MethodJIT Method

Sell One Buy One ConceptSell One Buy One Concept

Just- In-Time Parts Logistic is based on the Sell One Buy One Concept.

“It means that parts flow through the logistics “It means that parts flow through the logistics chain at the same pace as customer demand”chain at the same pace as customer demand”

Sell One Buy One and JIT logistics require

• High frequency stock replenishment• MAX-MAX Inventory control• Clearly defined stocking policy

Basic principles.Basic principles.

The basic elements of JIT Parts Logistics is frequent, small lot ordering and delivery

1. Max1. Max--Max Inventory controlMax Inventory control

“Sell One Sell One -- Buy One”Buy One” concept

TKM will start initially with weekly ordering and will move to daily ordering.

Max-Max Inventory control will allow lower safety stock and inventory at the dealership

Comparison of weekly order (W/O) Comparison of weekly order (W/O) -- MAXMAX--MAX and MAXMAX and MAX--MIN.MIN.

= order= order = receiving= receiving= on order= on order = on hand= on hand= sales= sales q’tyq’ty = receiving= receiving q’tyq’ty

WEEKLY ORDER /MAX-MAXMAX=15MAX=15

MAXMAX 1515

O/HO/H

MAX=17 MIN=13MAX=17 MIN=13WEEKLY ORDER / MAX-MIN

MAXMAX

MINMIN

2020

1313

Order Taking Order Taking -- Reducing Dealer Order FluctuationReducing Dealer Order Fluctuation

With MAXWith MAX--MAX parts are ordered MAX parts are ordered at every order opportunity.at every order opportunity.Therefore stock levels fluctuate Therefore stock levels fluctuate only half as much as with MAXonly half as much as with MAX--MIN. MIN. Maximum Inventory Position is also Maximum Inventory Position is also lower with MAXlower with MAX--MAX.MAX.

2. Heijunka 2. Heijunka -- Ordering StabilityOrdering Stability

Heijunka means that a stable level of ordering is obtained, resulting in a stable flow of parts through out the logistics chain, allowing standardized and efficient operations

To achieve Heijunka the following activities are necessary

• Separation of Actual and Created Demand

• Stability in workshop scheduling

• Irregularity control

• It is necessary to separate Created Demand and Actual Demand and handle them separately.

Created Demand (Fluctuating): Customer demand which is

not for immediate use by the end user

Actual Demand (Stable): Customer demand which is for

immediate use by the end user

TotalDemand

CreatedCreatedDemandDemand

OrderQuantity

ActualActualDemandDemand TimeTime

1 Separating Actual Demand and Created Demand

Fluctuating ( Sell One Buy One Not Followed )

•• Much S/S requiredMuch S/S required•• Fluctuation in warehouse Fluctuation in warehouse

work volume and work volume and manpower requirementsmanpower requirements

•• Little S/S requiredLittle S/S required•• Little fluctuation in warehouse Little fluctuation in warehouse

work volume and work volume and manpower requirements manpower requirements

( Dealer to TKM ) ( Dealer to TKM ) Reducing Dealer Order FluctuationReducing Dealer Order Fluctuation

Part Numbers OrderedPart Numbers Ordered

DDD

CCA

BBB

CBB

A

M T W T FM T W T FBAA

AA

B

Part Numbers OrderedPart Numbers Ordered

DCB

DCB

DCB

DCB

A

M T W T FM T W T FDCB

A AA A

Dealer order lines/dayDealer order lines/day

M T W T FM T W T F

Stable ( Sell One Buy One Is Followed )

Dealer order lines/dayDealer order lines/day

M T W T FM T W T F

Stocking Policy to achieve a Service Rate of 95%Stocking Policy to achieve a Service Rate of 95%

1. Stock Range1. Stock Range

Stock range is the number and type of part numbers

in dealer stock and it should be based on

a) Needs of Service [Parts Type]a) Needs of Service [Parts Type]

b) Demandb) Demand

c) Customer typec) Customer type

Stocking PolicyStocking Policy

2. Stock Depth2. Stock Depth

Stock depth is the quantity for each part number in stock

• It should cover the order cycle, lead-time and additionally some safety stock on a part number or parts group basis.

• The formula for Maximum Inventory Position (MIP) is used to calculate Suggested Order Quantity(SOQ).

MIP = MAD *MIP = MAD * ( O/C + L/T + S/S [ L/T + Demand ])( O/C + L/T + S/S [ L/T + Demand ])

MAD = Monthly Average Demand

O/C = Order cycle

L/T = Lead time

S/S = Safety stock

When to add new parts to your Stock?When to add new parts to your Stock?

• When demand occurs for the same part continuously for 2 months or 2 times in 3 months

Stocking CriteriaStocking Criteria

DEMAND N-4 N-3 N-2 N-1 N STOCK ?PART 001 YESPART 002 YESPART 003 NO

1. Inventory Control Class [ICC]1. Inventory Control Class [ICC]

2. Special Control Class [SCC]2. Special Control Class [SCC]

3. Monthly Average Demand [MAD]3. Monthly Average Demand [MAD]

4. Ordering Parameters4. Ordering Parameters

5. Order Quantity Calculation5. Order Quantity Calculation

6. TDMS Procedure6. TDMS Procedure

Inventory Control Inventory Control -- ParametersParameters

TOPSSTOPSS

•• Matrix with quantity and demand Matrix with quantity and demand fluctuation .fluctuation .

•• 6 months demand history is used.6 months demand history is used.

Demand Fluctuation Demand Fluctuation Highest Demand Highest Demand -- Lowest DemandLowest Demand==

MADMAD

Examples of ICC tablesExamples of ICC tables

999999.9999999.9

MAD Criteria ( PCS )MAD Criteria ( PCS )

A1 A2 A3 A4 A5A1 A2 A3 A4 A5

800800

B1 B2 B3 B4 B5B1 B2 B3 B4 B5

400400

C1 C2 C3 C4 C5C1 C2 C3 C4 C5

200200

D1 D2 D3 D4 D5D1 D2 D3 D4 D5

100100

E1 E2 E3 E4 E5E1 E2 E3 E4 E5

9999.999999.992002001001005050202000Fluctuation CriteriaFluctuation Criteria

-- Moving Class Moving Class --

1. General Inventory Control Class [ ICC]1. General Inventory Control Class [ ICC]

Examples of parts which should be controlled with SCC codes Examples of parts which should be controlled with SCC codes = Campaign parts, Seasonal parts, New model parts, Large parts, = Campaign parts, Seasonal parts, New model parts, Large parts,

High value parts, etc.High value parts, etc.

Automatic Automatic control SCCcontrol SCC

Manual Manual control SCCcontrol SCC

•• Set these SCC codes, manually by item or product.Set these SCC codes, manually by item or product.•• Update must also be performed manually.Update must also be performed manually.

•• SetSet--up criteria for each SCC type by product.up criteria for each SCC type by product.•• The system assigns or updates The system assigns or updates

the code automatically on a P/No. basis.the code automatically on a P/No. basis.

2. Special Inventory Control Class [ SCC]2. Special Inventory Control Class [ SCC]

Example of SCC Classifications in TOPSSExample of SCC Classifications in TOPSS

Product Group (Note)Product Group (Note) Purpose for Special ControlPurpose for Special Control

Parts for specified vehicles Parts for specified vehicles (i.e. Land (i.e. Land CrusierCrusier parts)parts)

Large parts Large parts (Large storage space required)(Large storage space required)

New New model model partsparts

Ensure highEnsure high suppliabilitysuppliability

Minimize stock volumeMinimize stock volume

Control with initial supplyControl with initial supply Q’tyQ’ty00--6 months6 months

Special control to follow recent trend Special control to follow recent trend ( 3 months demand for MAD )( 3 months demand for MAD )

Carefully monitor demand fluctuation trend Carefully monitor demand fluctuation trend ( 6 months demand for MAD )( 6 months demand for MAD )

Seasonal parts Seasonal parts Control stock considering seasonal trends.Control stock considering seasonal trends.

77--24 months24 months

25 months25 months

SCC TypeSCC Type

Minimize stock investmentMinimize stock investmentHighHigh--value parts value parts ( Significant risk piece )( Significant risk piece )

AutoAutosetset--upup


Example of SCC Classifications in TOPSSExample of SCC Classifications in TOPSS

Product Group (Note)Product Group (Note) Purpose for Special ControlPurpose for Special ControlSCC TypeSCC Type

Warranty parts (Only service dept. Warranty parts (Only service dept. knows required parts, quantity knows required parts, quantity and time)and time)

Maintain stock according to information Maintain stock according to information from service dept.from service dept.

Accessories Accessories (linked to new vehicle sales)(linked to new vehicle sales)

Procure parts and maintain stock to meet Procure parts and maintain stock to meet new vehicle sales volume.new vehicle sales volume.

Discontinued parts Discontinued parts (production is not possible)(production is not possible)

Only supply these parts to customers Only supply these parts to customers when there is actual demand.when there is actual demand.

ManualManualSetSet--upup


Campaign parts (Abrupt decrease Campaign parts (Abrupt decrease in demand before or after; in demand before or after; A significant increase in demandA significant increase in demandduring the campaign)during the campaign)

Maintain appropriate stock volume which Maintain appropriate stock volume which follows the fluctuation trend of demand.follows the fluctuation trend of demand.

•• Calculate MAD based on order receiving data, rather than sales Calculate MAD based on order receiving data, rather than sales data.data.

MonthMonth MonthMonth


SOQ = SOQ = MADMAD x ( O/C + L/T + S/S for L/T + S/S for Demand ) x ( O/C + L/T + S/S for L/T + S/S for Demand ) -- ( O/H + O/O ) + B/O( O/H + O/O ) + B/O

Maximum Inventory Position [MIP]Maximum Inventory Position [MIP]

•• Recalculate MAD monthly.Recalculate MAD monthly.•• Adopt FILL system ( FILL vs. KILL )Adopt FILL system ( FILL vs. KILL )•• Adopt FILL system ( FILL vs. KILL )Adopt FILL system ( FILL vs. KILL )•• Recalculate MAD monthlyRecalculate MAD monthly

1 MAD Calculation1 MAD Calculation1 MAD Calculation1 MAD Calculation1 MAD Calculation1 MAD Calculation


•• Adopt FILL system ( FILL vs. KILL )Adopt FILL system ( FILL vs. KILL )

Sales based MAD calculationSales based MAD calculation Order receipt based MAD calculationOrder receipt based MAD calculation

SalesSales Order ReceiptOrder Receipt

22 11 22 33 44 55 66 77 88 99 22 11 22 33

MADMAD MADMAD

B/OB/O B/OB/OB/OB/O

B/O releaseB/O release

44 55 66

•• Recalculate MAD monthly. Recalculate MAD monthly.

3. MAD [Monthly Average Demand]3. MAD [Monthly Average Demand]

ORDER CYCLEORDER CYCLELEAD TIMELEAD TIMESAFETY STOCK FOR LEAD TIMESAFETY STOCK FOR LEAD TIME

by ICC/SCCby ICC/SCC by Supplierby Supplier

•• Order Cycle is the period of time between stock replenishment oOrder Cycle is the period of time between stock replenishment orders.rders.

SAFETY STOCK FOR SAFETY STOCK FOR DEMAND FLUCTUATIONDEMAND FLUCTUATION

Order Cycle : Monthly : 1 time / month = 1.00Order Cycle : Monthly : 1 time / month = 1.00Weekly : 4 times / month = 0.25Weekly : 4 times / month = 0.25Daily : 20 working days / month = Daily : 20 working days / month = 0.050.05

SOQ = MAD x ( SOQ = MAD x ( O/CO/C + L/T + S/S for L/T + S/S for Demand ) + L/T + S/S for L/T + S/S for Demand ) -- ( O/H + O/O ) + B/O( O/H + O/O ) + B/O




by ICC/SCCby ICC/SCC by Supplierby Supplier


L/T = Average period from ordering to binning completion L/T = Average period from ordering to binning completion (ex) 6 days = 0.25 months(ex) 6 days = 0.25 months

S/S for L/T = Safety Stock used to cover fluctuation in L/TS/S for L/T = Safety Stock used to cover fluctuation in L/T

L/TL/TS/S for L/TS/S for L/T {

AverageAverage

ReceiptReceipt

Exceptions are Exceptions are not included when not included when determining S/S determining S/S for L/Tfor L/T

SOQ = MAD x ( O/C + SOQ = MAD x ( O/C + L/T + S/S for L/TL/T + S/S for L/T + S/S for Demand ) + S/S for Demand ) -- ( O/H + O/O ) + B/O( O/H + O/O ) + B/O




by Supplierby Supplierby ICC/SCCby ICC/SCC


•• Safety Stock for Demand is used to cover fluctuation in customeSafety Stock for Demand is used to cover fluctuation in customer demand ( sales ).r demand ( sales ).

•• Level of Safety Stock for Demand is controlled by ICC/SCC.Level of Safety Stock for Demand is controlled by ICC/SCC.

SOQ = MAD x ( O/C + L/T + S/S for L/T + SOQ = MAD x ( O/C + L/T + S/S for L/T + S/S for DemandS/S for Demand ) ) -- ( O/H + O/O ) + B/O( O/H + O/O ) + B/O



HighHigh

LowLow

S/S for Demand LevelS/S for Demand Level

A1A1 A2A2 A3A3B1B1 B2B2 B3B3 A4A4 B4B4D1D1 D2D2 D3D3 D4D4C1C1 C2C2 C3C3 C4C4 A5A5 B5B5 D5D5C5C5

HighHigh

LowLow


Fluctuation

EE Very SlowVery Slow Fixed StockFixed Stock Q’tyQ’ty 2.02.0 75.075.0DD SlowSlow Medium / LargeMedium / Large 8.08.0 88.088.0

CC MediumMedium LargeLarge 18.018.0 96.096.0

BB FastFast MediumMedium 25.025.0 98.098.0

AA Very FastVery Fast SmallSmall 45.045.0 99.099.0 45.045.0

25.025.017.017.0

7.07.02.02.0

Moving ClassMoving Class Level for S/S for DemandLevel for S/S for Demand A Sales Share(%)A Sales Share(%) B Target S/R(%)B Target S/R(%) A x BA x B

OVERALL TARGETOVERALL TARGETSERVICE RATESERVICE RATE 96.096.0

HighHigh

LowLow



HighHigh

LowLow


Fluctuation





25.025.017.017.0

7.07.02.02.0



Safety Stock for Demand (Example)Safety Stock for Demand (Example)

HighHigh

LowLow



HighHigh

LowLow


Fluctuation





25.025.017.017.0

7.07.02.02.0



HighHigh

LowLow



HighHigh

LowLow


Fluctuation





25.025.017.017.0

7.07.02.02.0



HighHigh

LowLow



HighHigh

LowLow


Fluctuation





25.025.017.017.0

7.07.02.02.0


OVERALL TARGETOVERALL TARGETSERVICE RATESERVICE RATE 96.096.0 %%


O/H = On Hand QuantityO/H = On Hand Quantity

O/O = On Order QuantityO/O = On Order Quantity

B/O = Back Order QuantityB/O = Back Order Quantity

SOQ = MAD x ( O/C + L/T + S/S for L/T + S/S for Demand ) SOQ = MAD x ( O/C + L/T + S/S for L/T + S/S for Demand ) -- ( ( O/H + O/OO/H + O/O ) + ) + B/OB/O



SOQ = { MAD x ( O/C + L/T + S/S for L/T + S/S for Demand) } SOQ = { MAD x ( O/C + L/T + S/S for L/T + S/S for Demand) } -- ( O/H + O/O ) + B/O( O/H + O/O ) + B/O

Maximum Inventory PositionMaximum Inventory Position

REVIEWREVIEW

•• Place orders using MAXPlace orders using MAX--MAX inventory control.MAX inventory control.

Review Question :Review Question :Question : What is the Suggested Order Quantity?Question : What is the Suggested Order Quantity?

(O/H=30, O/O=20, B/O=0, O/C=0.25, L/T=2.0, S/S=1.25)(O/H=30, O/O=20, B/O=0, O/C=0.25, L/T=2.0, S/S=1.25)

NN NN--11 NN--2 2

Monthly Demand Results :Monthly Demand Results :

6 Months6 MonthsDemand TotalDemand Total

2525 1111

NN--3 3 NN--4 4 NN--5 5

1818 2222 1313 1919 108108

Answer : MAD = 108 pieces / 6 Months = 18Answer : MAD = 108 pieces / 6 Months = 18

SOQ = 18 x ( 0.25 + 2.0 + 1.25 ) SOQ = 18 x ( 0.25 + 2.0 + 1.25 ) -- ( 30 + 20 ) + 0 = 13( 30 + 20 ) + 0 = 13

5. Order Quantity Calculation & Ordering5. Order Quantity Calculation & Ordering

ICC TABLEICC TABLE

6. ICC Table6. ICC Table

TDMS

Examples of ICC tables

999999.9

MAD Criteria ( PCS )

A1 A2 A3 A4 A5

600

B1 B2 B3 B4 B5

300

C1 C2 C3 C4 C5

150

D1 D2 D3 D4 D5

30

E1 E2 E3 E4 E5

9999.9920010050200Fluctuation Criteria

- Moving Class -

Safety Stock for DemandSafety Stock for Demand

999999.90.10 0.15 0.20 0.25 0.25

600

300

150

30

9999.9920010050200

- S/S for Demand

0.15 0.20 0.25 0.30 0.40

0.20 0.25 0.25 0.40 0.50

0.25 0.25 0.30 0.30 0.40

0.40 0.50 0.50 0.60 0.50

••Data can be collected from above reporting Data can be collected from above reporting menu option.menu option.

7. Inventory Management7. Inventory Management

••Inventory Trend Report Input screen .Inventory Trend Report Input screen .


•• Open TOPSSNT Folder in window directory in C DriveOpen TOPSSNT Folder in window directory in C Drive•• Then run the Inventory trend report. Then run the Inventory trend report.


PRC. DATE NO. OF ITEMMAD AMOUNT SERVICE RATEB/O ITEM B/O AMOUNTB/O STK MONTHO/H MAIN AMOUNT O/H MAIN STK MONTHO/H F/O AMOUNTO/H F/O STK MONTHO/H SVC AMOUNTO/H SVC STK MONTHO/O SEA AMOUNT200409 8770 211,305,807 100 0 0 0 223,370,388 0.7 0 0 23,871,628 0.1 33,165,095 200410 10827 213,722,236 100 0 0 0 216,185,505 0.7 0 0 8,162,043 0 41,992,144 200411 10831 213,947,351 100 0 0 0 201,708,126 0.7 0 0 5,869,218 0 26,249,843 200412 10834 215,006,925 100 0 0 0 192,774,810 0.7 0 0 12,763,671 0.1 23,285,923 200501 10839 221,650,833 100 0 0 0 177,786,277 0.6 0 0 9,344,065 0 16,734,386 200502 14933 218,870,240 100 0 0 0 190,275,204 0.6 0 0 14,409,229 0.1 23,226,037 200503 14946 227,761,334 100 0 0 0 229,424,561 0.8 0 0 1,668,136 0 26,809,227 200504 14972 219,804,735 100 0 0 0 254,188,148 0.9 0 0 14,318,590 0.1 31,260,408 200505 0 - 0 0 0 0 - 0 0 0 - 0 - 200506 0 - 0 0 0 0 - 0 0 0 - 0 - 200507 0 - 0 0 0 0 - 0 0 0 - 0 - 200508 0 - 0 0 0 0 - 0 0 0 - 0 -

IPT ALL FR ALL SUPPLIER ALL ICC ALL SCC ALL SCCM ALL*** INVENTORY TREND REPORT ***

O/O SEA STK MONTHO/O AIR AMOUNT O/O AIR STK MONTHO/O F/O AMOUNTO/O F/O STK MONTHTTL O/H AMOUNT STD STK AMOUNT O/S ITEM O/S AMOUNT O/S STK MONTHREPL. ITEMREPL. AMOUNT REPL. STK MONTH0.2 15,302,144 0.1 0 0 223,370,388 278,605,811 391 99,195,650 0.5 271 178,302,701 0.80.2 15,345,369 0.1 0 0 216,185,505 277,346,560 392 104,918,429 0.5 280 174,241,527 0.80.1 15,345,369 0.1 0 0 201,708,126 279,681,819 367 95,554,661 0.4 299 179,397,572 0.80.1 15,329,786 0.1 0 0 192,774,810 283,942,065 365 77,368,203 0.4 297 181,299,129 0.80.1 15,329,786 0.1 0 0 177,786,277 285,871,304 359 63,762,357 0.3 313 181,191,449 0.80.1 15,310,223 0.1 0 0 190,275,204 280,616,298 403 73,026,730 0.3 306 177,777,053 0.80.1 15,308,023 0.1 0 0 229,424,561 288,928,228 520 117,085,085 0.5 295 178,256,888 0.80.1 15,309,123 0.1 0 0 254,188,148 289,463,940 546 129,914,074 0.6 309 179,508,456 0.8

0 - 0 0 0 - - 0 - 0 0 - 00 - 0 0 0 - - 0 - 0 0 - 00 - 0 0 0 - - 0 - 0 0 - 00 - 0 0 0 - - 0 - 0 0 - 0

•• Inventory trend Report Output. Inventory trend Report Output.


••Inventory Analysis Report Output Screen.Inventory Analysis Report Output Screen.


••Inventory Analysis Report Output screen.Inventory Analysis Report Output screen.


Cooperation with other SectionsCooperation with other Sections

Lean Parts LogisticsLean Parts Logistics

SalesSales

Inventory ManagementInventory Management

ServiceService

ProcurementProcurementDemandDemandControlControl

I/C TechniquesI/C Techniques

1. inventory mgmt

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