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.
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
Biography
Ed C. Mercado
