Warehouse management system in supply chain networks

A warehouse management system (WMS) is one of the key technologies required to create a successful adaptive supply chain networks. In an adaptive supply chain networks, the extended warehouse can respond to a variety of business requirements.

And on the other way,a successfully deployed WMS can turn inventory into a strategic, competitive advantage.You can create a perpetual or continuous inventory in order to keep book inventory continuously in agreement with stock on hand within specified time periods. And you can accomplish reconciliation between book inventory and stock on hand as often as after each transaction.

Cycle counting based on SKU velocity is one method of creating a perpetual inventory. Because you are conducting a daily, or even more frequent, counting, the annual physical inventory becomes a historical reference. Before implementing a perpetual inventory process, have corporate auditors approve the processes involved.

Although it is not mandatory, the best opportunity for converting to a perpetual inventory usually occurs when you are converting or upgrading to a new WMS. During the conversion process, you take a physical inventory not only to compare the actual stock on hand with the system of record and book the variance but also to create a baseline. You compare the baseline with the daily counts. Once the auditors are satisfied that the daily counts are accurate, there is no longer a need for annual physicals because the perpetual counts are correct.

This approach to inventory control provides the following benefits: Increased inventory accuracy ;Reduced labor costs by not conducting annual physical counts, which can add up to hundreds of full-time equivalents per facility and often encroach into overtime costs ;Decreased capital investments in products, with fewer dayson- hand inventory

Yao Zhou

The World is Flat

The other day on my Marketing class we discussed the book the World is Flat. My teacher made us see a video about the author talking to a group of university students. I wanted to share the information of the video with you. The author explains how the world has becoming flat. He first talks about the eras:

First Era (1490-1800) the world went from a size large to a size medium. Individuals start getting global through their countries
Second Era (1800-200)the world went from size M to S. Companies started globalizing. Individuals went global through their companies.
Third Era (2000-Future) the world went from size S to XS. Individuals started globalizing. Every individual gets more competitive.

After explaining the process, he talks about some events and calls them flatteners:
-11/9-->Berlin wall came down
-8/9/95-->Development of Netscape. Communication around the world becomes easier.
-Fiber optic cable improves the work flow
-Virtual work--> People connect with other people like never before
-Outsourcing
-Off shoring  in order to reduce costs, companies started taking the whole factory to other countries.
-Open sourcing  people working at home
-Global Supply Chain  Integrated SC and cross functional areas
-Informing  getting information in a easy way (Google)

These flatteners have made thing easier but at the same time difficult. There is more competition, the supply chain has become more complex and difficult to manage and there are more challenges. As the author says, there is no such thing as the American job any more. About this last statement, I watched the movie Outsourcing and it shows how some jobs have been outsourced to other countries. Nowadays, as professionals there is more competition, we are not competing anymore with our classmates but with everyone in the whole world. Every day is important to know more languages, have better skills and be more analytical in order to solve the new problems that this flat world brings.

Andrea Luque

Inventory in the Forest??

This post is not necessarily related to what we’ve been covering in class, but it is a very interesting application of inventory management. Scientists are going to St. Lucia in January to take inventory of the forests there. They are going to take stock of all the trees animals and birds and assess the health of the trees in a forest reserve. This sounds like a perfect job for someone with a graduate degree in operations management. You could spend the winter in the Caribbean counting trees. I’m really not sure what they are going to do with the inventory numbers once they finish their count. Maybe the forest is overgrown and they need to cut some of the trees down to save on inventory holding costs.

Whit Brown

Inventory impacts on ROI

We have learned the importance to have the right amount of inventory in order to satisfy customers demand. Inventory also affects companies’ financial systems. One of the ways to see the impact of inventory is to measure ROI (Return on investment). ROI is the ratio of Profit and Capital employed. Lets first talk about how inventory affects profit. Inventory affects Profit because the cost of inventory reduces Revenue. Logistics efficiency would be important to reduce these operational costs. I would say that to increase efficiency you can reduce lead times, have better transportation and good relationships with suppliers.
The capital employed is affected by inventory, accounts receivables, cash and fixed assets. Capital employed is affected two times by inventory. First by Inventory, that is the amount of money invested on the products plus the holding cost. This is the part that puts more money in the capital. Inventory also affects Account Receivable because you don’t have the product in your warehouse anymore but us money that your customer owes you. Companies should take care of this; they should deliver as fast as they can the product and make sure they get pay for it. There are some policies that they can use with their customer in order to cash their money.
If companies reduce the costs of inventory, have the correct amount of product in their warehouse and reduce the customers’ debt; they can have a better value of ROI.

Andrea Luque

Effects of Inventory On Retailers Before Christmas

Christmas is quickly approaching and retailers are in the process of raising inventory levels to meet the higher levels of demand. However, with the credit crunch and slowing economy raising inventory levels will be harder this year. According to an article I read, some retailers are filing for bankruptcy because they do not have the resources to pay for their inventory build up. Increasing inventory levels requires a significant amount of money. Some companies have enough cash to pay for it, but many have to take out short term loans to pay for it. The credit crunch has made it even harder for companies to acquire funding for their inventory. I think this is a great example of the important role inventory plays in the operations of a company, and we always focus on determining order quantities and finding the minimum cost, but companies also have to find a way to pay for this inventory.
-Whit Brown

JIT&EPQ

The phenomenal success of Japanese manufacturing firms in the global marketplace has been attributed in part to their innovative use of JIT as a component of their competitive strategy. JIT practices have rapidly spread throughout the world. In parallel, there is a growing inter-disciplinary literature that attempts to understand the theoretical underpinnings of JIT and refine its implementation. The fundamental idea behind JIT is to make production batch(lot) sizes smaller and smaller and move products through the production process in these small batches. Batch-size reductions trigger a chain reaction of benefits including reduced inventories in the system, reduced material waste, improved quality, and higher employee responsibility.
There are many advantages of that a manufacture can receive from JIT: possible increase in profits, quality products, quicker setup, eliminates costs of storage facilities, More flexible employees, Quality relationships with suppliers, elimination of waste, No down time.

The classical economic production quantity (EPQ) model assumes that items produced are of perfect quality and that the unit cost of production is fixed. In practice, the problem that inventory managements face directly is the uncertainty of demand, which has been examined mostly in the EOQ inventory model. Therefore, we will consider about the EPQ inventory model with the uncertainty of demand, and the model will be separate into two parts- a model without shortages or backorders, and a model with shortages or backorders. EPQ model used when the stock (inventory) of an item is periodically being re-supplied concurrently with it being drawn from stock. The production rate must exceed the usage rate for this model to work.

Yao Zhou

OM