The figure is an example ABC Days-On-Hand Inventory Profile. The profile illustrates the average days-on-hand of inventory in ABC item tegories. Days-on-hand reporting is often more effective than percentages or turns because of the mental comparison that is easily made between days-on-hand and typical item lead times.nThe example is typical, where C items may have nearly a year or sometimes many more days-on-hand. In the example, nearly 70% of the items have an average of 230 days-on-hand (more than 6 months worth of supply). Depending on the type of business (this was a retail business), this often represent a dramatic opportunity for inventory reduction through item elimination and/or outsourcing the supply of those items.
The unit fill rate (UFR) for an item is the portion of the total number of units...
Optimal storage utilization helps enforce healthy inventory management. In our early work with Honda their...
Efficient procurement inventory (EPI) is often required to realize steep discounts when a special opportunity...
Suppose you were sick and went to the doctor for a diagnosis and prescription. When...
The inventory carrying rate (ICR) is the percent of the unit inventory value used to...
ABC Days-on-Hand Profile
The RightStock™ model also distinguishes between value added inventory (VAI) and excess, non-value added inventory (NVAI). Value added inventory is the sum of safety stock, lot size, and pipeline inventory. Those three types of inventory
Active and dead stock inventories are relative references to inventory that is fast vs slow/not moving. The definitions of “fast, “slow” and “not” are also relative. The most common definition of active inventory is inventory
Seasonality and build inventory (SBI) levels production, machine, line and plant utilization. One of our clients is a large frozen food manufacturer and one of the largest producers of frozen pies. The large majority of
Inventory should also be classified by its stage in the value stream. Raw material inventory (RMI) has no value added. Work-in-process (WIP) has some value added, but is not finished. Finished goods inventory (FGI) has
A few years ago I received a phone call from one of the world’s most advanced supply chain CPG firms. They wanted our assistance with inventory optimization. I was quite surprised by the purpose of
The inventory carrying rate (ICR) is the percent of the unit inventory value used to compute inventory carrying cost (ICC). The inventory carrying rate includes: Opportunity cost of capital (the rate of return that could
An optimization statement is comprised of two components - an objective function and constraints. Isolated to inventory, the optimization becomes finding the inventory level that yields the best possible financial performance for the business and
The "bullwhip effect" in supply chain management is a reference to the increase in the variability of order sizes and the accompanying increase in inventory levels that occur moving backwards in the supply chain from
In a recent project with one of the world’s largest and most critical healthcare providers I was stunned to learn that they did not even measure inventory accuracy, let alone know what it was or
The inventory conundrum is exacerbated by many complicating factors. Those factors can be categorized into five major malfunctions: Data Discrepancies Inadequate Training & Education Problematic Perspectives Misaligned Metrics Poisonous Paradigms Data Discrepancies Base Data