Inventory Management Solution

Archive for tag ‘Robert Lamarre’

Who’s pulling the weight

Monday 2 August 2010

In more than 80% of organizations, management of min-max is left in the hands of managers who are often caught between a rock and a hard place. On the one hand the sales people operations and maintenance all strive to ensure they do not encounter any shortages. On the other hand, the finance people, bankers and shareholders are all concerned about the money tied up in inventory.
Inventories are manually adjusted in response to the company’s crises. If a major customer encountered a stock shortage, the min-max are increased. At quarter end finance people want the inventory as low as possible. Procurement is stopped and the min-max are reduced.

The “Miracle Department” reacts again and corrects the situation. The expectations of the organization are extremely high towards the inventory management department. It is expected that these individuals manually adjust min-max for 15,000 to 35,000 items without making any mistakes. They must consider seasonality as well as upward or downward demand trends. They know when an item, used twice a year, will be requested next.

A recipient of a master’s degree in Operations Research, I have over 30 years of experience and am recognized as a leader in Quebec in Inventory Management. However, even with my experience, I do not have the capability to manage 35,000 items and to manually determine the optimal min-max.

The good news is that inventory management is now a science. There are formulas and calculations which allow optimizing inventory management and automatically and dynamically setting (with automatic and computerized revisions at month-end) the min-max in order to achieve the organizational objectives of service while minimizing inventories. Min-max that are managed using this approach usually increase the overall rate of availability of parts or items with 25% to 50% less inventory.

Another positive point is that inventory management is also an art. The machine does not know everything. A good inventory management system will notify managers it is time to adjust a min-max when:
- there are sudden changes in the pattern of consumption;
- a new item has now enough history to use the automatic mode;
- the system has difficulty in establishing reliable consumption forecasts for a given item;
- there is an open order to the supplier for an item in surplus (a customer order might have been canceled, stock might have been returned from another customer or for any other valid reason);
- an item has not been consumed for six months;
- the calculated min-max for the coming month is quite different from the previous min-max;
- or for any other defined signal.

Put a talented and artistic inventory manager in command of a good scientific system and you will obtain the perfect balance for managing inventory. It’s a thousand times more effective!

Robert Lamarre

Inventory management and health

Tuesday 29 June 2010

The AQLASS conference held last week brought together Supply Chain professionals from Quebec’s health care sector. The challenges of inventory management are important. Most managers have few tools to manage the services offered to the users based on the availability of their inventory. Supply chain leaders must manually review the Min and Max for thousands of items to prevent shortages and provide excellent service. Obviously, this is accomplished with much higher inventory levels than necessary. Nevertheless, they still face shortages.

The ABC classification of their items is not frequently used.  Few tools are used to manage the delivery lead time.

There is no forecasting tool to predict future needs.

Communication with health-care units to determine what should be kept in inventory is still the only form of forecasting. However, there are ways to automating and optimizing the inventory management. Health care institutions in the United States have an edge over in this field.

It was significant to see more than 300 Supply Chain professionals of the health care sector meet and, among other things, discuss how they could improve inventory management in our institutions. There is money to save, but more importantly, the institutions are seeking greater control of their service levels and on the availability of the medical supplies.

We were proud to be invited and participate at this major event and which will undoubtedly have positive repercussions for the Quebec’s health institutions.

Robert Lamarre

Why give priority to inventory management?

Monday 3 May 2010

Discipline must be an essential component of our daily lives if we are to succeed professionnally and attain our goals.  This rule also applies to inventory management.

Concepts such as classification of parts, grouping of parts and the criticality of every part must be implemented in every company.  Unfortunately, these notions of inventory management are not yet installed in our management practices.

However, is Customer Service part of your priorities?

Is business productivity part of your management practices?

Do you buy and sell only when the cost price is at its lowest?

Do you want to increase your profits?

You wonder what these objectives might have in common with your priorities?

Let me share with you the experience of a production company that suffered from constant delays and bad service at the beginning of every fall session.  The staff could no longer suffice  due to the increased demand at this particular time of the year.  Their rolling stock was garage-bound because of broken parts.

It is normal for equipment to be in repair.  For it to remain there, no.  After taking note of the problem, the administration asked itself why there was always a shortage of parts in the repair shop. As a solution, they decided to increase their inventory to eliminate stock disruptions.  Although their stock levels gradually built up, the situation did not improve.  Worse, they had an accumulation of inventory surplus notwithstanding parts that had become obsolete. After various observations and analyses of their inventory, it was decided to proceed otherwise by classifying their parts into specific groupings.

We must all have a surplus of critical parts in inventory that are available at all times to ensure an adequate customer service.  This is the direction the company took.  Each part is now sorted into a   category that belongs to a specific group along with its level of criticality. Thus, the problem was resolved and all their rolling stock was on the road when required.  As a result, their level of service increased by more than 10%, complaints were significantly reduced and their customer service was built up.  Therefore, are you disciplined?

The true salary of those storekeepers

Thursday 8 April 2010

Whether a business is big or small, the concept of replacement parts is applied according to the principle of never being in short supply.  How many times have we heard this?  Do you know how much this could cost your business?  Abitibi-Bowater was undergoing its restructuration process when a great quantity of electric motors were found in its inventory.  Enough motors to supply all its factories for a twelve-year period.  ’Man’ is an emotional being that does not enjoy being caught short.

A storekeeper is not different from other people.  He wants to avoid outbursts from his boss, colleagues or friends resulting from a shortage of parts or backorders.  For him, the best way to ensure availability of parts (service wise) is to increase inventories without taking into account the demand, criticality or costs.  However, did you know that it is possible to increase the level of serviceable parts and at the same time decrease the entire inventory?

Today’s high performance data processing systems can achieve mathematical calculations that can be applied to inventory management.  Access to an expert in inventory management is now available at your fingertips and he also speaks your language.