Parcel - August 2008 - (Page 16) operations mand planning the decisions on proper inventory levels often fall on procurement or production planning personnel — and inventories are established without visibility to customer requirements. It is highly recommended that the demand plan is coordinated by those closest to the customer, even if initial forecasts have relatively low accuracy; the objective is a quest for continuous improvement. Inventory and logistics planning is the heart of the supply chain. This is where the tactical synchronization of demand and supply occurs; and usually the focus of the finger pointing. “Inventories are too high, but order fulfillment is too low.” More often than not, the root cause resides elsewhere in the supply chain; it just becomes evident here. Residing in the middle of the supply chain it is impacted by turbulence in demand or supply as well as ineffective strategic planning or execution. Responsibility for inventory accuracy and master data accuracy should be defined and targeted at 99%. Warehousing, distribution and transportation requirements are derived from the formal inventory plan and demand plan. Advanced systems provide buffer stock calculations to manage demand variability and recommended replenishment planning. Reviewing the assortment through product rationalization, traditional ABC classification techniques and disposition of obsolescence are also important elements of this process. Supply planning needs to be closely integrated with the inventory plan and corresponding demand plan. In the case of manufacturing companies, production planning and material requirements planning may also reside here. The total cost of ownership should be used as a decision making tool that includes: purchase order processing costs, purchase price, transportation costs, import charges, warehousing costs, inventory carrying costs and Invoice processing costs. The impact on warehouse capacity and operations should also be considered. Competitor capabilities and customer requirements should both be clearly understood. A formal vendor performance process and strategies for continuity of supply, including the evaluation of alternative sources, are typical best-practices. Remember, the chances for success are much greater if, prior to embarking on an SCE system that optimizes on a functional level, an organization first reviews its supply chain structure and planning systems. There’s no sense going into this process blind. David J. Land is Manager of Professional Services for Cornerstone Solutions, Inc., a supply chain management consulting firm. He is a Certified Supply Chain Professional (CSCP) and is Certified in Production and Inventory Management (CPIM). He can be reached by phone at 260-496-8259 or via email at dland@cornerstones.com. ■ 16 August 2008 www.PARCELindustry.com http://precisionsoftware.com http://www.PARCELindustry.com
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