Safety Stock Optimization

Many of you are looking for a correct, comprehensive safety-stock calculation. My company’s approach is based on more than 15 years of development and testing. As we have learned through extensive experience, optimized safety stock requires more than a formula. We use complex demand–data modeling and calculations. We provide a service, not a spreadsheet. You send us your data. We send you the results.

Our safety-stock model is correct and comprehensive, providing optimal safety stock levels for your service-level and financial-performance targets. We include all the factors that affect safety stock and service level, and apply the proper statistical techniques to them. We do not utilize the usual stockout-event-based metric, but the same quantity-based fill-rate criterion that most companies use to measure actual service-level performance during a month, quarter or year. Our calculations represent the right-skewed and sporadic patterns typical of real demand data. Our model also includes past-due demand and its disruptions, probability of past-due-demand cancellation, lead time, reorder quantity (MOQ, EOQ, etc.), package size and reorder-review frequency. Finally, our results provide a high degree of confidence, typically 95%, of consistently achieving your target service levels without costly expediting.

For more details, see our white papers at www.topdownleansystems.com/white.htm. Page 16 of the “Common Safety Stock Calculations” white paper has examples of our safety-stock analysis. Also, see how you do on our Safety Stock Quiz, at www.topdownleansystems.com/quiz.htm.

To demonstrate the power of our approach, we would be happy to calculate and analyze safety-stock levels for a sample of your inventory items at no charge. Send me data on up to 30 of your items, and we will send you results – safety stock quantity and safety stock days for each item. Our analysis also includes each item’s range of expected actual performance for fill rate; average reorder and on-order quantities; average quantity on-hand, days on-hand and inventory turnover; average daily demand and demand activity percentage.

We require this data for each item: Item identifier, target fill rate, reorder quantity (MOQ, EOQ, batch size, lot size, etc.) or reorder frequency, package size (order multiple), lead time, probability of past-due-demand cancellation, days in actual service-level measurement cycle, and as much historical daily time-series demand as possible (three years is best, two is better, one is good). We perform extensive pre-screening on your input data to identify potential issues and to avoid “garbage in, garbage out.”

Send me your contact information via www.topdownleansystems.com/contact.php. I’ll provide you with a file containing input-data examples. Of course, I’ll be happy to explain our model in more detail and to answer your questions, at your request.

David McPhetrige, TopDown Lean Systems

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Supply Chain Design

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Things to do to improve warehouse productivity

warehouse 4Business may be slow now but before you know it you’ll be jammed again. Want to get more done with the folks you have?  Things to consider:

  1. Keep the lifts in good repair
  2. Batteries getting old?
  3. Stagger shift starts – replenish forward picking before the first wave
  4. Reslot often
  5. Not enough space, then make more – get to 10% empty forwards and 20% empty reserves
  6. Qualify and prioritize the inbound freight – need the trailer now, or later?
  7. Qualify the product going into reserve
  8. Get the inbound current and under control before tackling pick, pack, ship
  9. Fix any and all inventory inaccuracy root causes
  10. Have fresh eyes look at the problem – select different supervisors or warehouse workers look at other areas
  11. Eliminate touches
  12. Minimize travel
  13. Right size the forwards, so inbound doesn’t need to go into reserve
  14. Align the picking method for each product with its order pattern
  15. Can the WMS round up order quantities to an easily picked unit or measure?
  16. Engage the troops
  17. Every DC worker makes thousands of decisions each day; understand and guide discretionary decision-making
  18. Solve the workforce’s boredom problem
  19. Most supervisors spend less than 5% of their time on motivating employees, double that and double productivity
  20. Inbound congestion means waste and extra touches
  21. Housekeeping
  22. Address the annoyances that demotivate
  23. Keep inbound under control and putaway as timely as possible
  24. Recalculate Safety Stock
  25. Update leadtimes
  26. Bust the inbound batch sizes
  27. Increase inbound visibility, smooth the spikes if you can
  28. Publish metrics for all to see and encourage friendly competition between zones, departments, facilities
  29. Create a ‘dog pound’ and move slow movers out of the way
  30. Study and fight outbound congestion
  31. Adjust the number of pick zones; fewer the better
  32. Synchronize order filling across all zones
  33. Keep current on replenishment
  34. Never run out of supplies (totes, pallets, carts, tape)
  35. Adjust the organization chart
  36. Constantly monitor outbound flow; rebalance pick, pack, and loading
  37. Reduce the number of job classifications
  38. Use inbound teams and eliminate staging areas: unload, receive and put away with one touch not two or three
  39. Brainstorm and then brainstorm some more
  40. Be careful what you measure
  41. If you are in a meltdown, get help
  42. Consider postal pick location address scheme; going down an aisle picking on left and right instead of down one side and coming back the other

 

 

 

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Walmart Sustainable Product Index

Why do you think Walmart is asking these questions of their 100,000 suppliers? Can you answer these questions by October 1, 2009? How much staff time will it take to gather this data? If you aren’t a Walmart supplier don’t think for a second you are off the hook; when will your key customers start asking similar questions?

Energy and Climate: Reducing Energy Costs and Greenhouse Gas Emissions
1. Have you measured your corporate greenhouse gas emissions?
2. Have you opted to report your greenhouse gas emissions to the Carbon Disclosure Project (CDP)?
3. What is your total annual greenhouse gas emissions reported in the most recent year measured?
4. Have you set publicly available greenhouse gas reduction targets? If yes, what are those targets?

Material Efficiency: Reducing Waste and Enhancing Quality
1. If measured, please report the total amount of solid waste generated from the facilities that produce your product(s) for Walmart for the most recent year measured.
2. Have you set publicly available solid waste reduction targets? If yes, what are those targets?
3. If measured, please report total water use from facilities that produce your product(s) for Walmart for the most recent year measured.
4. Have you set publicly available water use reduction targets? If yes, what are those targets?

Natural Resources: Producing High Quality, Responsibly Sourced Raw Materials
1. Have you established publicly available sustainability purchasing guidelines for your direct suppliers that address issues such as environmental compliance, employment practices and product/ingredient safety?
2. Have you obtained 3rd party certifications for any of the products that you sell to Walmart?

People and Community: Ensuring Responsible and Ethical Production
1. Do you know the location of 100 percent of the facilities that produce your product(s)?
2. Before beginning a business relationship with a manufacturing facility, do you evaluate the quality of, and capacity for, production?
3. Do you have a process for managing social compliance at the manufacturing level?
4. Do you work with your supply base to resolve issues found during social compliance evaluations and also document specific corrections and improvements?
5. Do you invest in community development activities in the markets you source from and/or operate within?

Reference: http://walmartstores.com/FactsNews/NewsRoom/9277.aspx

 

 

 

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Simplified Systematic Network Planning – step 6

STEP 6: DETAIL AND DO
Step 6 details and implements the network plan selected in Step 5. If the purpose of the network planning project is simply to conduct and analysis and make a presentation, no actual changes will be planned. When actual changes will be made, the planner first prepares a Gantt chart of the implementation schedule in the Detail and Do worksheet

0907_LIA_pg31_2

The Gantt chart serves as a communication tool, outlining the tasks needed to change the network, the person(s) responsible for each task and the scheduled time for the task to be undertaken. Actual implementation is done by professionals in the field. But it is always good for the network planner to be involved in this process to track the changes, build credibility, and confirm the effectiveness of the recommendation.

Post implementation audits capture actual saving from changes to the network. The Detail and Do worksheet provides a section for the planner to measure the variances between the projected and actual savings and to explain them. This is especially important in understanding why the model did or did not result in the expected savings and provides useful lessons for future modeling efforts. In our example, fuel price increases eliminated half the projected savings. Given this impact the planners should probably include fuel price projections in future models of this type.

 

 

 

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