EXPLANATION OF KEY POINTS FOR

INVENTORY MANAGEMENT
 INDEX

SECTION Contents
I. Methods & Techniques 1. Logistics Map
2. Macro Level Control
A) Analysis by ICC/SCC
B) L/T Survey
C) Other Reports
3. Micro Level Control --- Monitoring
II. Logistics Map 1. General Explanation

III. Analysis by ICC & SCC 1. Inventory Trend Reports

2. Inventory Class Review List

IV. Reporting 1. Lead Time (L/T) Survey

2. Service Rate Report
3. Stock Month Distribution List
4. Inventory Analysis Report
V. Monitoring 1. Lead Time Monitoring
2. Part Number Monitoring
3. Customer Analysis by Part No.
 INTRODUCTION

BASIC KAIZEN STEPS:

Setup target Check Monthly Service Rate
service rate and Stock Month Distribution
and target by ICC/SCC. (Also check the Detail List for
stock month tendency of the monthly service the P/No:
by ICC/SCC rate and stock months) • under target
service rate
• excess stock
Understand
Current Check the problem by P/No. through
Situation Monthly P/No. Monitor Report

Reconfirm Monthly
START Part No.
Problems
Monitoring
Start Monitoring Root Cause
Other P/No. Analysis

Check Results &

Countermeasure
Adjust Parameter
 I. METHODS & TECHNIQUES

1. LOGISTICS MAP
Purpose:
• To understand the parts flow from dealers to suppliers.
• To grasp the overall situation at each process of the supply chain.

2. MACRO LEVEL CONTROL

Purpose:
• To clarify the inventory problems and grasp the effect of Kaizen
by ICC/SCC and other macro level indices.

3. MICRO LEVEL CONTROL

Purpose:
• To identify the problems by finding the root cause at the part  
number level.
 II. LOGISTICS MAP
Key Point: Show the total logistics structure
<Example>

• Daily Order
• O/C = 3 times/day
• Weekly Delivery
• Delivery = 3 times/day
• L/T = 30 days
• L/T = 1 day
TMC Dealer(s) at
Urban Area
CPD

• Daily Order & • O/C = 1 times/day

• Daily Delivery • Delivery = 1 times/day Dealer(s) at
• L/T = 2 days
Local Supplier • L/T = 2 day Suburb Area
 II. LOGISTICS MAP

Required Information (supplier):

By Supplier and by types of transportation (Sea, Air, Land)
• Order Cycle (to supplier)
• Delivery Frequency (from supplier)
• L/T

Required Information (by customer):

• Customer Type (dealer, parts jobber, workshops, etc)
• Order Type (S/O, E/O, VOR, F/O)
• Order Cycle (to CPD)
• Delivery Frequency (from CPD)
• L/T
• Sales / Shipped Items Share %
 III. ANALYSIS BY ICC AND SCC
1. Inventory & S/R Trend Reports
Key Point: Review the condition of service rate and stock month by ICC &SCC.

<Example> Inventory Class A1 This report can be printed by:

100 6.0
• ALL ICC/SCC
Target S/R 5.0 • By ICC/SCC
Service Rate (%)

90
96%
• By Supplier

Stock Month
4.0
80
3.0
70
2.0
Target S/M
60 2.0(M) 1.0
50
J F M A M J J A S O N D

Available Information: By Total & By ICC/SCC

• Target Service Rate Required Action:
• Service Rate Change ordering parameters.
• Target Stock Month
• Stock Month
 III. ANALYSIS BY ICC AND SCC
2. Inventory Class Review List
Key Point: Review the appropriateness of classifications of inventory
control criteria.

This report can be printed by:

• By Supplier
Available Information: By ICC
• Items and share %
• MAD (Landed Cost Sales) and
share %
• On-Hand Stock Amount (L/C) and
share %

Required Action:
Change MAD & fluctuation
criteria at the matrix
 IV. REPORTING
1. Lead Time Survey Report
Key Points:
• Monitor average lead times from order to binning confirmation
by order no.
• This data should be used to adjust lead time parameters and
in lead time reduction Kaizen activity.

This report can be printed by:

• Order Type (E/O or S/O) Required Action:
• Change lead time parameters.
Available Information: By Supplier • Lead time reduction Kaizen activity
• (Line and Qty) Average L/T
 IV. REPORTING
1. Lead Time Survey Report
Setup Lead Time Parameter (for your reference)
SOQ = MAD x ( O/C + L/T + S/S for L/T + S/S for Demand ) - ( O/H + O/O ) + B/O

Maximum Inventory Position

by ICC/SCC by Supplier by Part No.

ORDER CYCLE
LEAD TIME
SAFETY STOCK FOR LEAD TIME
SAFETY STOCK FOR
DEMAND FLUCTUATION

L/T = Average period from ordering to binning completion

(ex) 60 days = 2.00 months

NOTICE: When you calculate L/T, please consider the following points.
• Exclude irregular cases (please consider at 95% of the cases)
• For more precise information, please consider the weighted average.
 IV. REPORTING
2. Service Rate Report
Key Points:
• Show the service rates by ICC & SCC
• Line Service Rate = Suppliability calculated by lines.
• Amount Service Rate = Suppliability calculated by amount.

This report can be printed by:

Without With • Supplier
F/O F/O

Available Information:
By ICC/SCC
• Detailed supply info.
• Line / Amount Service Rate

Required Action:
• Investigate the reason of low
S/R and take countermeasure.
 IV. REPORTING
3. Stock Month Distribution List
Key Point:
• Show the distribution of items and stock month by ICC & SCC

Appropriate Stock Level within an ICC

Bad Example Good Example
# of ICC: B1 # of ICC: B1
P/Nos. P/Nos.

Stock Stock
Months Months
(On-Hand) (On-Hand)
2.0 3.0 4.0 2.0 3.0 4.0
short stock ideal overstock short stock ideal overstock
 IV. REPORTING
4. Inventory Analysis Report
Key Points:
• Grasp the inventory status (stock months of On-hand, On-Order, and Total)
by ICC / SCC.
• Identify the ICC & SCC with high stock month.

This report can be printed by:

• Supplier

Available Information:
By ICC/SCC
• Inventory Status

Required Action:
• Compare with the trend of
Service Rate
• Check the reason of increasing
stock and take countermeasure.
 V. MONITORING
1. Lead Time Monitoring
Key Points:
• Identify the process lead time and the fluctuation of lead time.

This report can be printed by:

• Supplier

Available Information:
By Order No.
• Lead time of each process
• Order completion %

Required Action:
• Identify the reason for lead
time fluctuation.
• Lead time fluctuation kaizen
activity.
 V. MONITORING
2. Part Number Monitoring
INVENTORY REPORT : P/NO.MICRO ANALYSIS or ”My Parts Watching”
MTH SALES
1999 PART NO. MAD I/C Method O/C L/T S/S Total HISTORY: N-1 N-2 N-3 N-4 N-5
December 90919-
90919-01184 600.0 MAX - MAX 0.25 1.20 0.68 2.13 590 564 642 723 666

1000 -100
O/H,O/O,Receive

B/O
500 -50 Received
O/H
0 0
On Order
-500 50
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19
Day
300
Sales/Order

200
ORDER

100 SALES

0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19
Day
Day 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19
Sales - 54 23 39 37 34 29 22 29 70 17 51 29 49 32 34 49 34 1
Received - - 190 - 760 - - 215 - - - - - 170 - - - - -
O/H 400 346 513 474 437 403 374 567 538 468 451 400 371 492 460 426 377 578 577
On Order 810 810 620 620 840 840 840 625 625 809 809 809 809 639 817 817 817 582 582
O / H + O / O 1210 1156 1133 1094 1277 1243 1214 1192 1163 1277 1260 1209 1180 1131 1277 1243 1194 1160 1159
B/O
Order - - - - 220 - - - - 184 - - -- - -- 178 - - -- - -
 V. MONITORING
2. Part Number Monitoring
Key Points:
• Grasp the movement of stock (sales, receiving, ordering) to check the
appropriate stock level.

Required Action:
• Identify the reason for the fluctuation of demand, supply, ordering, and receiving.
• Identify balance between on-hand, on order, and sales.
 V. MONITORING
3. Customer Analysis by Part No.
Key Points:
• Review the customer behavior.

This report can be printed by:

• Customer

Available Information:
• Order Qty by P/No.

Required Action:
• Identify the reason for
demand fluctuation by each
customer.
THANK YOU