Supply Chain Management - SCM Supply Chain Management Inventory Management

The term appeared in 1988 when founders of the American company i2sangiv to Sanjiv Sidhu and Ken Sharma found the next unoccupied niche in the market of information systems. Since then, many suppliers have offered a variety of solutions that are positioned to manage the supply chain.

SCM systems are designed to automate and manage all supply stages of the enterprise and to monitor the entire movement of goods in the enterprise. The SCM system allows you to significantly better meet the demand for the company's products and significantly reduce the costs of logistics and procurement. SCM covers the entire cycle of raw materials procurement, production and distribution. Researchers typically identify six main areas that focus on supply chain management: production, supply, site, inventory, transportation, and information. Most concepts in the field of SCM were originally used by the military. After all, logistics is an important attribute of army mobility and a criterion for a sharp, timely response to the situation.

History

In the early 60s, work began in the United States to automate inventory management. As a result of the strong growth of large-scale and mass production of consumer goods and trade after the Second World War, it became clear that the use of mathematical models of demand planning and inventory management leads to significant savings in funds frozen in the form of stocks and in-process production. It is impossible to develop "absolutely optimal methods of inventory planning," therefore, it is necessary to select and adapt algorithms to the specifics of specific warehouse tasks depending on the production cycle or deliveries of the stored item, cost, sizes of products, packaging, applicability and demand, warehouse volumes, etc. It was found that choosing the optimal volume of the order lot is one of the most important conditions for improving the efficiency of the enterprise, since their insufficient volume leads to an increase in administrative costs for repeated orders, and excessive - to freeze funds. Warehouse management in modern management systems is based on mathematical methods of inventory management. The first automated inventory management systems in industrial production were based on calculations on the specification of the composition of the product. According to the production plan, production plans were formed and the volume of procurement of materials and components was calculated. The end of the 60s is associated with the work of Oliver White, who, in the conditions of automation of industrial enterprises, proposed to consider production, supply and sales units in a complex. This approach and the use of computer technology for the first time made it possible to quickly correct planned tasks in the production process (when changing needs, adjusting orders, lack of resources, equipment failures).

Tasks

SCM Action Systematics

• Improving Service Levels
• Optimize Production Cycle
• Reduction of inventory
• Improving Enterprise Productivity
• Increase profitability
• Production Process Control

SCM solutions create optimal plans for the use of existing production lines, detailing what, when and in what sequence should be produced taking into account capacity constraints, raw materials and materials, lot sizes and the need to transfer equipment to the release of a new product. This helps achieve high demand satisfaction at minimal cost. According to AMR Research and Forrester Research, with the implementation of SCM, companies gain such competitive advantages as reducing the cost and processing time of an order (per 20-40%), reducing purchase costs (per 5-15%), reducing time to market (per 15-30%), reducing inventory (per 20-40%), reducing production costs (per 5-15%), increasing profit per 5-15%.

The Supplier used to decide. Now the client decides when, what, where and at what price to deliver. If you buy an item online you expect to find feedback on it, price matching, many shipping options and quick return.

SCM Structure Rating

AMR Research data from companies regarding SCM performance.

A well-functioning supply chain helps you improve your planning system, optimize your inventory, deliver on time, meet supply-to-demand, reduce costs, and increase your market value. It is no secret that the success of Apple's business is largely due to professional supply chain management and constant activities aimed at assessing their effectiveness. According to AMR Research, the top 25 companies with the most productive and productive supply chain system included 10 largest IT companies, and Apple took the leading position. Supports the positions of the apple office no less eminent Dell. Surprisingly, among Japanese companies, which are known for their close attention to industrial hygiene and constant improvement in the efficiency of the entire chain of structures, there is only Toyota, which was in tenth place.

Who manages the stock?

As a rule, in a trading company, the stock is managed by a buyer (purchasing manager, category manager, supplier, etc.) - there are many variants of names. We will use the generic term "purchaser," implying the execution of part of the work related to inventory management.

The tactics of the buyer may vary. Let's look at the extreme options.

1) Expert buyer: subtly feels the market, knows everything about the purchased product, has excellent, often friendly, relations with suppliers, relies on intuition, experience and his idea of ​ ​ priorities. Expert buyers work efficiently and efficiently, providing serious competitive advantages. However, sometimes their work is not transparent to management; it is very difficult for the expert to find a replacement, and if he leaves the company, the lion's share of the expert's achievements will leave with him.

2) The clerk buyer is another extreme - an indifferent executor of the job description, managing the stock according to formal indicators, who does not have any unique knowledge. The clerk is relatively easy to find a replacement or rotate personnel, the quality of his work is determined mainly by the quality of the description of work processes, the employer's cost of maintaining such a specialist is relatively small. The payment for these benefits is staff turnover, formal attitude to the cause, unprofessionalism.

If you want to get an ideal buyer, you need to look for it, most likely, between the above extremes. Obviously, we need a specialist who is not indifferent to the matter, managing the stock no less efficiently than the "expert" buyer. However, replacing it should not be particularly difficult if necessary. One of the solutions may be the work of a neat and loyal employee armed with progressive stock management tools. It is important that the essence of the calculation inventory management methodology remains behind the screen, ensuring the preservation of "know-how" - calculations are carried out by the computer at the click of a button.

How do I manage the stock?

What is the essence of the daily work of a stock management specialist? She is looking for answers to two sacramental questions for each item:

1. Is it time to replenish the stock of this product?

2. If it's time, what's the order size?

Of course, the job description of the head of the reserve is more diverse and richer, but it is extremely rare to circumvent these issues.

How the process can occur:

• A specialist can estimate actual balances by noting items with insufficient levels.
• The specialist evaluates the dynamics of sales, for example, referring to sellers or memory when the goods were last delivered.
• The specialist decides on the purchase, specifying the order amount taking into account the following factors:
  • minimum batch;
  • Discount terms;
  • the company has financial reserves;
  • information from the market;
  • Own flair; � many other factors.

If it is optimistic to assume that the specialist takes 50% working time directly for this work, then spending 10 minutes to analyze one item per week, you can process about 120 product items, which is clearly not enough in most cases. In addition, the inventory management specialist meets with suppliers, conducts correspondence with external and internal counterparties, participates in meetings, in the informal life of the office. In practice, by hand, one specialist can qualitatively manage no more than 20-40 positions. A significant jump in efficiency can be realized if a significant part of the routine operations to calculate the need for goods is delegated to the computer. At the same time, you can expect not only an increase in productivity in stock management, but also an increase in quality: the machine will not miss a single position and will be able to take into account a larger number of variables, and the specialist will have more time and effort on creative tasks.

CPS Automation

Another important condition of efficiency is the price of implementing the system: it is always better to train the existing information system in inventory management methods than to buy a new one! What should the automatic inventory management system do? Of course, the minimum requirement on the part of the specialist inventory manager is to provide a structured report on the items whose stock needs replenishment. Office folklore resembles a certain button, pressing which the specialist receives the desired report. Let's see what the information system should do to implement the button-report concept. Let me remind you that in theory several stock classes are distinguished:

• Main (working, insurance, unplanned sales growth, transportation delays)
• Temporary (seasonal, marketing or market) and forced (illiquids and marriage).

Time inventory management involves the analysis of a large number of informal factors: it is necessary to rely on flair, for example, when forming stock for a product with expected extraordinary demand (market stock), or on the experience of previous years (seasonal stock). It is rare to automate time reserve management due to many informal factors: you can change the overall level of stock using seasonality factors, but acceptable reliability can only be expected from complex expert systems. In this case, it is easier to use the services of an expert buyer. The management of the forced stock is mainly limited to determining the scale of the disaster, analyzing the reasons for the appearance of such a stock and deciding on the future fate of the deposits of illiquids and scrap. Most of the routine operations are usually in the management of the main stock. Accordingly, the automation of its management can be expected to have the greatest effect.

Inventory Management Strategy

The variety of inventory management strategies is reduced to two main and the mass of their derivatives: fixed-order management and fixed-frequency management. An illustration of the first method of control can be the filling of a car with always the same amount of fuel, but on different days. The calculation comes down to the definition of the day of the trip to the gas station. In the simplest case, the moment is considered to have come if the corresponding light bulb on the instrument panel of the car caught fire. More progressive algorithms could take into account the dynamics of fuel consumption recently, urging the driver to refuel earlier with increased consumption and later - in the opposite case. This option is unlikely to interest motorists, but buyers will probably like it in relation to the stock. Control with a fixed frequency can be recognized if the driver goes to a gas station, for example, every Monday and buys a different amount of fuel. Which one is to be calculated. By the way, if you refuel every Monday to the "full tank," we will get a stock management system with a fixed frequency and a set maximum. Which strategy is preferred for successful automation? Any choice, together with merit, will also bring with it disadvantages, but without any initial strategy, any choice will be a boon. Based on the hypothesis that close attention to the product to some extent guarantees better management, and given that it is easier for a person to work on a schedule, let's assume that the choice is made in favor of daily balance control, that is, a strategy with a constant period is chosen.

Order size calculation

The mission of the inventory manager of the trading company is to ensure the availability of goods in the warehouse. More strictly, the presence or absence of the goods can be expressed through the "level of availability" (DD). If 100 customers went to the warehouse and all received their orders complete, DM = 100%. If one customer did not receive the order due to lack of goods, the DM drops to 99%. Read the main article (SCM: Calculation of Order Size)

See also

Logistics Information System

SCP

SCE