WORKSHOP SYNOPSIS:

Simply stated, the operational challenge of any supplier is to provide customers with products that will create maximum revenue from sales in a way that results in a sufficient operating profit for the company. In recent years, many important changes have combined to limit a supplier’s ability to meet this challenge. First, products are exhibiting an increasingly wide range of features and themes with shorter life cycles and hence it often becomes difficult to forecast customer preference for specific products. Second, customers are increasingly lowering their on-site inventories by emphasizing rapid replenishment of goods bought by consumers. Third, the incorporation of SAP and other ERP systems have limited the ability of a supplier to create customized and differentiated inventory policies. Many suppliers attempt to meet the challenge of providing timely and short lead time deliveries to customers by maintaining large inventories. As a result, many suppliers are experiencing an interesting and traditionally unusual combination of both high overstock costs (i.e., significant number of obsolescent products) and high understock costs (i.e., poor customer service levels).

This workshop details the models needed to implement an inventory buffering system based on a hybrid “push-pull” mechanism that takes advantage of the strengths of both methods of inventory management. That is, a “push” mechanism for building inventory of quantities that have a high potential for sale is utilized when appropriate, combined with a “pull” mechanism for replenishment of inventories based on up-to-date consumer behaviour. If done correctly, inventory is managed effectively both in terms of costs and flexibility.

• Exercise to illustrate planning challenges and hidden costs in inventory management
• Bullwhip effect – main causes, negative impact, remedies
• Review of the purpose of inventory and relevant inventory-related costs
• Review of various inventory strategies and methods – push vs. pull
• Background – basic statistics to quantify uncertainty
• Variable review inventory models to balance variable carrying & fixed ordering costs
• Periodic review inventory models to meet targeted service level
• Models to create differentiated inventory build-up to minimize overstocks
• Determination of capacity buffers for pull system implementation
• Risk pooling and aggregation of uncertainty
• Hands-on exercises to implement inventory models in Excel