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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...

Non-Conformance Chargebacks

An important follow-up to the creation of supplier certification criteria is the design of rewards and penalties for extraordinary performance or non-conformance to established criteria.  Typical rewards are high-profile vendor recognition, long-term contracts, and sole sourcing.  Typical penalties include fines for specific violations of the certification criteria, sourcing reductions, and/or rejected receipts.  The LIS should support and automate a program of chargebacks for non-conformance to stated criteria according to published non-conformance charges.

One of our retail clients inspects each receipt; takes a digital picture of each non-conformance; invoices the supplier for each violation based on its published penalty charge; and includes the digital picture with the non-conformance invoice.  Another organization classifies their vendors into “white hat” and “black hat” categories based on their historic delivery quality.  “Black hat” vendors are charged $20 per hour for every hour spent in receiving inspection.  The most severe non-conformance penalty program I am aware of is a client who charges each vendor 2x the retail value of all the contents of an inbound truckload is there is ANY non-conformance in the entire truckload.

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