Hands-On Inventory Management

Better inventory management translates directly into better cash flow for businesses. However, in order to successfully manage inventory, businesses must strike a balance between customer demand and the amount of inventory they keep. Hands-On Inventory Management demonstrates principles key to developing an inventory management process, which will meet customer needs while keeping inventory costs at a level reasonable enough to produce a profit.  The text explains basic inventory principles, calculations, and techniques using real-world examples. Different operational situations require different inventory planning and replenishment approaches; hence, this book emphasizes the prerequisites needed for success in a number of different industries. These prerequisites include top management support, a clear definition of responsibilities and alignment of goals throughout the company, as well as uncomplicated item identification. The author stresses the importance of accurate recordkeeping and delineates the most common causes of inaccurate records. He provides solutions to mitigate these causes and demonstrates how businesses can develop and administer a cycle counting program that will lead to a more well-managed physical inventory. Using a building-block approach, Hands-On Inventory Management gives a clear view of what steps must be taken to strike a profitable balance between customer demand and inventory.

Introduction Objective of Inventory Management Reasons to Carry Inventory Too Much Inventory Too Little Inventory Costs Associated with Inventory Profits and Cash Flow are Different Things Eternal Issues of Inventory Management Prerequisites for Effective Inventory Management Operational Environments How Operational Situations Impact Inventory  A Retail Store (Merchandising Environment) A Producer of Retail Items (Make-To-Stock Environment) A Specialty Steel Fabrication Shop (Make-to-Order Environment) A PreEngineered Firm (Engineer-To-Order Environment)  Flow Process Environment Project Environment  Types of Inventory Different Inventory Items Require Different Controls Classification by Stage in the Production Process Classification by Responsibility Classification by Value of Annual Usage—ABC Classification  The ABC Classification Other Ways of Classifying Inventory Measures of Inventory Effectiveness Percentage of Inventory with No Requirements (Demand) in Upcoming X Months (Lower Is Better) Percentage of Inventory with No Issues for the Last X Months (Lower Is Better) Days Inventory On Hand (Lower Is Better) Other Measures Aligning Goals with Other Departments Purchasing and Inventory Management Production and Inventory Management Lowering Inventory Levels Engineering, Production, and Purchasing Responsibility for Inventory Management Inventory Transactions The Need for Inventory Records When Should A Part Number Be Assigned? Part Numbering Schemes Significant Part Numbers Nonsignificant Part Numbers Combination Part Numbers Why Use Records? Bills of Materials  Inventory Accuracy The Need for Inventory Record Accuracy Achieving Inventory Accuracy Only Two Types of Inventory Transactions Transactions that Increase Quantity on Hand  Transactions that Decrease Quantity on Hand Root Causes of the Most Common Transaction Errors How to Error-Proof Transactions First-Time Data Entry Avoid Rekeying Data Format and Error Checking in Documents Cycle Counting and Physical Inventory Objective of Cycle Counting Where to Begin Cycle Counting Definition of Cycle Count Variance Definition of a CutOff Point Example of Incorrect CutOff Other Causes of Discrepancies and Suggested Analyses Setting Up a Cycle Count Program Physical Inventory  Inventory Planning and Replenishment How to Determine What and How Much Inventory Is Needed Different Operational Situations Require Different Techniques Inventory Planning: How Much Do We Need? Dependent and Independent Demand How Far Ahead To Guess Requirements? Situation Example 1: Retail Store Situation Example 2: Producer of Retail Products Situation Example 3: A Specialty Steel Fabrication Plant Situation Example 4: A Preengineered Conveyor Company Situation Example 5: Producer of Configured Products (Assemble-to-Order) Situation Example 6: Maintenance, Repair and Operating Items, Indirect items, Consumables Situation Example 7: Food Processing Plant (Process Flow Environment) The Basic Reorder Point Technique Economic Order Quantity (EOQ) Visual Techniques Materials Requirements Planning (MRP) The Basic MRP Record  Other MRP Details  The Concept of Safety Stock Stocking More Than We Need Single Period Inventory Model Summary of Inventory Planning and Replenishment Storage and Physical Control The Receiving Process A Starting Point: Good Housekeeping Assigning Physical Locations Point-of-Use Inventory Consignment Inventory Success Factors for Consignment Programs Supplier-Managed Inventory Supply-Chain Management Definition of Supply-Chain Management The Systems Viewpoint 86 The Firm’s Place in the Supply Chain Coordination with Other Elements in the Supply Chain Opportunities for Improvement are All Over the Supply Chain An Example of a Supply-Chain Opportunity Lean Principles and Continuous Improvement Lean Principles Examples to Eliminate Waste Tools for Lean Management The Concept of 5 S Just-In-Time (JIT) Concepts Kaizen (Continuous Improvement) For Further Reading

Ed C. Mercado