Inventory Control

Objectives + Analysis
Background
Per new FDA requirements being enforced on traceability, all saleable products must be
adjusted to meet new standards (unless documented as exempt).
“Global Trade Item Numbers” (GTIN) requirements for all applicable products:
◦ Physical markings
◦ Derivation of GTIN from labels

Deadlines:
Objective
What would it take to sell only compliant products after Sep2019 deadlines?
Required Actions:
- Identification, removal, and replacement of old, non-compliant SKUs (valued at $24m)
- Cross-functional efforts required:
Engineering Provide information on product update timelines, data analysis and strategies
Regulatory Provide insight into regulatory requirements and potential to salvage product
Finance Run cost/benefit analyses on multiple courses of actions to justify and approve scrap
losses
Distribution Provide resources for identifying and removing non-compliant lots in DCs worldwide
Purchasing / Re-purchase of scrapped/high-demand product based on scrap, 3PL timelines and
Sales demand forecasts
 Approach (1)
Known Unknown
• List of affected SKUs (approx. 1700) • On-hand lots (IDs, Locations, Dates of manufacture)
• Label and Physical GTIN compliance

- The SKU and Lot IDs combined make a unique identifier, which helps when searching across
systems: Class II Parts Lot Number SKU+LOT
2112-0010 F18M13857D 2112-0010F18M13857D
2112-0010 F18V14562D 2112-0010F18V14562D

- On-hand reports in all Distribution Centers were generated and compiled based on the SKU list
(contains Lot IDs and locations)
- The lots were cross-referenced within the PLCM system to determine lot completion dates
◦ Wrote a script to automate pulling relevant files and extracting data from the PLCM software
 Approach (2)
Known Unknown
• List of affected SKUs (approx. 1700) • Label and Physical GTIN compliance
• On-hand lots (IDs, Locations, Dates of manufacture)
- Information further cross-referenced with drawing release and label update dates to determine
the compliance status
Date of Lot Record Creation Date of Drawing Release Created after 9/24/18 or before dwg. Release?
4/6/2018 5/17/2017 FALSE
Result:
Based off the analysis, combined with sales forecasts, about $8.6 million of the original $24 million
is at risk for scrap:
Results (1)
Due to large number of affected SKUs and lots, as well as the high cost of scrapping product,
several additional cost mitigations were considered:
◦ Rework old parts in order to update new markings
◦ Relabel old lots to include GTIN information

Additional cost considerations:

◦ Identifying, pulling and shipping non-compliant lots
◦ Paying third-party suppliers for reworking lots
◦ Resourcing for receiving old parts back into ERP systems
Approach (3)
The FDA requirements were updated during the analysis process – granting the option to use
already existing part markings (DI/PI) in lieu of GTIN markings (if manufactured before Sep2018).
Known Unknown
• List of affected SKUs • SKUs that can use DI/PI instead of GTIN
• On-hand lots (IDs, Locations, Dates of mfg.)
• Label and Physical GTIN compliance

An analysis showed about 90% of affected SKUs fall under the DI/PI umbrella. Upon re-review of
the data, the projected scrap figure dropped further from $8.6m to $1.6m:
Results (2)
With the cost reduced to a much more manageable number – gradual phase out of non-
compliant product has begun per approval from Finance, and with Distribution support.
◦ SKU phase out activity is based off of analysis on replenishment lead times and demand forecasts.

Overall estimated scrap forecast: $1.6m