Smart Inventory Solutions / Edition 2

by Phillip Slater

Overview

Engineers and reliability professionals are increasingly being held accountable for materials and spare parts inventory management and in response they need to gain a better understanding of materials and spare parts inventory management principles and practices. This practical book delivers just that.   

This new edition will help you get the right parts, in the right place, at the right time, for the right reason. Fully revised, it provides specific coverage of the issues faced in, and requirements for, managing engineering materials and spare parts and what to do to improve your results. It includes 29 exclusive examples and real life case studies to demonstrate the application of the concepts and ideas so that you will easy and quickly understand how to implement them. What's more it will show you: What to do to truly optimize your inventory holdings, Why inventory levels are almost always too high, How to identifying the factors that have greatest impact on your inventory levels, When to apply the 7 Actions for Inventory Reduction, Where to focus your efforts for greatest effect, and Who to involve in taking action. The concepts, ideas, tools, and processes in this book have helped many companies achieve and sustain results that other inventory tools and approaches just could not match. And it is sure to help you achieve true inventory optimization as well!

Features

The second edition includes…

• A new chapter on The Mechanics of Inventory Management, a pragmatic review of the management of inventory including… Introducing the Materials and Inventory Management Cycle, Comparing theoretical and actual inventory outcomes, Discussion on normal and Poisson distribution models, How to determine the re order point, How to determine the re order quantity, and Commentary on Monte Carlo simulation.
• An expanded chapter on the financial impact of inventory, including a discussion of the key reports that need to be understood.
• Chapters on the influence of policies, procedures, and people.
• Additional discussion on issues faced and how to address them.
• An expansion of the central process discussed in the first edition to a more comprehensive review process…Inventory Process™ Optimization.
• An expanded section on executing an inventory review program.
• A closing 'where to from here' chapter.
• 57 figures and diagrams - 30 of them new and the others all revised and updated and six new tables (with 8 in total).
• Eight new checklists - specifically included as a new tool for the reader and is the result of direct reader requests.
• An expanded glossary.

Product Details

ISBN-13:	9780831134013
Publisher:	Industrial Press, Inc.
Publication date:	03/15/2010
Edition description:	Second Edition
Pages:	275
Product dimensions:	6.20(w) x 9.00(h) x 0.90(d)
Age Range:	18 Years

About the Author

Phillip Slater has more than 22 years of business improvement experience. While the most recent years have been spent in operations and management consulting, the first 10 were spent ‘hands on’ in industry learning by direct experience. It was during this time, and by learning from both his successes and failures, that Phillip developed many of the approaches that his company, Initiate Action, applies today.

Based on his experience, Phillip has authored a number of management books including A New Strategy for Continuous Improvement and Smart Inventory Solutions. Over the course of his career Phillip has worked in at least a dozen countries and across most industries. He presents training courses for APICS, is a member of the Australian Institute of Company Directors and The National Speaker’s Association of Australia.

Selected operational improvement achievements include:

• As a manager, taking an underperforming manufacturer to be the profit leader in its group of companies
• Assisting a client to achieve more than 20% in operational cost reduction
• Assisting other clients to achieve tens of millions of dollars of operational improvements
• Assisting a client to achieve a 42% reduction in inventory
• Assisting other clients to release millions of dollars in cash from excess inventory

Most recently, Phillip has donated his time as a Non Executive Director for Yooralla, one of Australia’s leading disability service providers. In addition to his operations improvement consulting work, Phillip is also available for corporate speaking and training.

Table of Contents

Chapter 1 Introduction to Smart Inventory Solutions 1

Achieving True Inventory Optimization 1

Inventory: The Forgotten Investment 2

Inventory Process Optimization™ 4

Management, Reduction, or Optimization? 4

Generating Lasting Results 7

Chapter 2 The Mechanics of Inventory Management 9

Simple not Simplistic 9

Materials or Inventory? 10

Relevant Terms and Expressions 10

What is the Purpose of Having Inventory? 12

Why Spares and Indirect Inventory Is Different 13

An Introduction to the Materials & Inventory Management Cycle 15

Comparison of Theoretical and Actual Inventory Management and Control 16

Determining the Re-Order Point (ROP) 19

Determining the Re-Order Quantity (ROQ) 26

A Word on Monte Carlo Simulation 29

Do You Hold Too Much Inventory? Check Your Stock Turn Ratio 29

Chapter 3 The Financial Impact of Inventory 33

Don't Overcompensate 33

The Inventory Management Tension 34

Cash Is King 35

A Simple Model of Business Economics 35

The Four Financial Reports that You Absolutely Must Understand 40

How Much Cash Can You Generate? 43

Chapter 4 People and Processes 49

The People Factor 49

Adopting a Zero Inventory Mindset 54

The Influence of Process 55

Systems Thinking 56

The MIM Cycle in Detail 58

Chapter 5 Policies & Procedures 63

When is Critical Really Critical? 63

The Spares Stocking Policy 68

Chapter 6 Issues, Myths and a Few Home Truths 77

Why Inventory Reduction Often Fails 77

Cracking the Inventory Code 78

5 Myths of Inventory Reduction 82

Why You Might Hold More Inventory Than You Really Need 89

Chapter 7 The Spare Parts Storeroom 97

The Central Hub 97

Squirrel Stores & Why You Would Be Nuts to Keep Them 98

MRO and Engineering Spares: Lean, Mean or Somewhere In Between? 106

Is Your Storeroom a Pit Stop or a Supermarket? 114

Chapter 8 The 7 Actions for Inventory Reduction 117

The Bath Tub Principle 117

Hypothesis Driven Analysis 118

Double Loop Learning 119

Action #1 Have Someone Else Hold It and/or Pay For It 121

Action #2 Sell Excess and Obsolete Stock 127

Action #3 Eliminate Duplication 132

Action #4 Change the Factors That Drive Safety Stock 136

Action #5 Reduce Reorder Stock 141

Action #6 More Closely Match Delivery with Usage 145

Action #7 Reduce the Value of Items Held 149

Chapter 9 Inventory Process Optimization™ 153

Beware Implicit Assumptions 153

The Inventory Process Optimization™ Method 155

Stream 1 The Individual Parts Review 158

The Inventory Cash Release® Process

Getting the Focus Right

When to Apply Which Action

The Step-By-Step Process

Example Application of the ICR® Process

Reviewing the Long Tail

Stream 2 The Management Process Review 182

Chapter 10 Execution: Taking Action to Achieve Results 183

Selecting Your Inventory Review Champion 185

The Role of Your Inventory Review Champion 187

Who to Involve in an Inventory Review Program 188

The Three Stages of an Inventory Process Optimization™ Program 189

Measuring Your Progress 202

Integrating New Inventory Items 203

Integrating Inventory Process Optimization™ with Inventory Management 205

Chapter 11 Case Studies 209

Case Study 1 Establishing a Materials and Inventory Management System 211

Case Study 2 Applying the Inventory Process Optimization™ Method 217

Chapter 12 Where To From Here? 225

Bibliography 231

Appendix A Materials and Inventory Management Glossary 233

Appendix B Data Collection Questions 251

Index 255