The customer-item sales activity profile is a joint distribution revealing the amount of $ or unit sales accomplished in nine or more segments of business. The profile reveals the amount of sales accomplished on A items going to A customers, A items going to B customers, …, C items going to C customers. It highlights the dramatic differences in the logistics activities in different channels of the same enterprise. For example, there are typically very few customers, very few items, high volumes, high revenues, and intense competition in the AA segment. There are typically very many customers, very many items, low volumes, low revenues, and little to no competition in the CC category. The logistics strategy should reflect these stark contrasts.
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...
Customer-SKU Activity Profiling & Data Mining
We frequently find it helpful to identify and rank order root and systemic causes of excess inventory. An example completed for a large HVAC client is depicted below. In this case the root causes in
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
Hedge inventory (HI) mitigates risks of potential sharp price increases, shortages in critical commodities, and extreme price and availability volatility for those same items. Fuel is a classic example of a commodity whose inventory may
Contingency and disaster inventory (CDI) insures against unexpected situations outside the realm of those covered by traditional safety stock inventory. Those situations include natural disasters, labor strikes, and other abnormal supply chain disruptions. For example,
The shortage factor is the % of an item's unit selling price (USP) that is lost in the event of a stockout and subsequent lost sale. It is used to compute the lost sales cost. For example, if the
Setup cost (SUC) is the cost to setup (prepare or changeover) a machine or production line to make a production run for a particular item or change between items. It is sometimes referred to as changeover cost (COC).
The purchase order cost (POC) is the cost of placing a purchase order from a vendor. The majority of those costs are related to sourcing, purchasing, and procurement salaries and benefits (italics) and include: Purchase
As a part of the National Science Foundation’s Japan Technology Evaluation Center I had the unique privilege to lead a major study for the U.S. government comparing U.S. and Japanese logistics systems. During the study
There are two conceptual models for inventory management – push and pull. The push inventory model is so called because the emphasis is on "pushing" speculative inventory, made-to-forecast (MTF) in response to forecasted demand, out
Order status communication should be proactive when there is an exception to the order contents, timing, or terms agreed upon at order entry. Order status information should be updated in real-time and should be available