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Monthly Archives

May 2013

Why Your Lead Time Process Delivers Major Out-of-Stocks and Steps to FixLead Time is increasingly ignored as the culprit responsible for out-of-stock. Today, logistics costs have plummeted while logistics capability has skyrocketed. RFID tags, consolidation of logistic companies, and instant internet information have all contributed to lower costs and better operating efficiencies. This has helped instill a belief that Out-of-Stocks associated with lead time are generally blamed on the supplier, not on logistics or process.

The supplier issues that create out-of-stocks may include:

  • Late Delivery: not meeting a PO landing date request
  • Inconsistency in supplier lead time across purchase orders (PO)
  • Lead time doesn’t match what was initially agreed by supplier and buyer

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YES, Weekly Replenishment CAUSES Out-of-Stocks and Lost SalesYou believe a weekly replenishment process that includes reviewing plan, inventory, and sales to make purchase order decisions is profitable.  Some people think weekly replenishment increases turns for the business.  Your weekly review and reorder for inventory replenishment also suggests razor sharp exception management processes are in place, ready to act.  Weekly review and reorder means there is little chance for out-of-stocks or extraneous freight costs to occur. Historically, these ideas promote the belief that human review and intervention on a weekly basis is the correct and profitable course of action.

So, how is that weekly replenishment process working out for you?

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Differences in Inventory Replenishment Methodology: Facts and MythsThe Inventory Replenishment Methodology a supply chain solution uses to flag when an inventory replenishment order should be placed is critical to consider when reviewing supply chain software. Review any of the mainstay inventory replenishment systems, and you see what becomes obvious – there are only two methodologies possible. The system signals an inventory replenishment order is needed based on a combination of date, plan, and demand (top down) or based on a combination of service goal, demand, and available inventory (bottom up). Everything after that flag is a mix of tools and features that differ in each software package. While these two inventory replenishment methodologies have similar features and names, the critical things for you to know are:

  • How to identify which methodology is used by your software (or software you are reviewing).
  • The costs and goals of each methodology and how the differences impact each line of business in your company.

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