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KNOWLEDGE LIBRARY

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27Jun

Warehouse Occupancy Percentage

Optimal storage utilization helps enforce healthy inventory management. In our early work with Honda their...

02Jun

Efficient Procurement Inventory

Efficient procurement inventory (EPI) is often required to realize steep discounts when a special opportunity...

02Jun

Inventory Carrying Rate

The inventory carrying rate (ICR) is the percent of the unit inventory value used to...

26Jun

Inventory Activity Profiling & Data Mining

Suppose you were sick and went to the doctor for a diagnosis and prescription.  When...

27Jun

Inventory Performance Measures

Inventory performance measures include financial, productivity , quality, and response time indicators for evaluating the efficiency and...

Inventory Activity Profiling & Data Mining

Suppose you were sick and went to the doctor for a diagnosis and prescription.  When you arrived at the doctor’s office, he already had a prescription waiting for you, without even talking to you, let alone looking at you, examining you, doing blood work, etc..  In effect, he diagnosed you with his eyes closed and a random prescription generator.  Needless to say, you would not be going back to that doctor for treatment.

Unfortunately, the prescriptions for many sick logistics operations are written and implemented without either much examination or testing.  For lack of knowledge, lack of tools, and/or lack of time, many logistics re-engineering and layout projects commence without any understanding of the root cause of the problems and without exploration of the real opportunities for improvement.

Logistics activity profiling is the systematic analysis of item and order activity.  The activity profiling process is designed to quickly identify the root cause of material and information flow problems, to pinpoint major opportunities for process improvements, and to provide an objective basis for project-team decision making.  We will start with some of the major motivations and potential roadblocks to successful profiling.  Then we will review a full set of example profiles and their interpretations.  The examples will serve to teach the principles of profiling and as an outline for the full set of profiles required for re-engineering logistics operations.  We will finish with the data gathering, data compilation, data analysis, and data presentation process required in profiling.

The main purpose of inventory activity profiling is to reveal inventory shortages and excesses at major points in the supply chain in the units of measure and buckets that can be acted upon.  The revelations in turn suggest courses of action for increasing availability in under-served segments and reducing inventory levels where excesses have accrued.  We will consider some example profiles and recommended courses of action below.

My experience with inventory reduction initiatives is that there is rarely a single, major source of inventory buildups.  Instead, inventory piles up in many places for many reasons, some valid and some not.  (It is a lot like the way ”r;stuff” piles up in a in a house – bits and pieces everywhere most with very little explanation.)

The inventory activity profile pinpoints the major opportunities to reduce inventory and improve customer service at the same time.  It identifies places in the supply chain and/or categories of merchandise where excess has accumulated.  The inventory profile reports the turns, days-on-hand, and inventory investment for each item, item category, and vendor for each facility, region, in-transit, and in total.

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