CPE Inventory Optimization Project

INGENIERA DE LA PRODUCTIVIDAD
NOVEMBER 13, 2008
NOMBRE Marco Antonio Silva Javier Snchez Flores Miguel Casillas Velasco Carlos Sergio Arrieta Serrato MATRICULA A01048110 A00266037 A00343715 A00343714 SEDE CD. JUAREZ SALTILLO COLIMA COLIMA

Inventory Optimization Report

Points of Discussion

Definition of the Problem

Root Causes Current Process Map Improvement Opportunities Suggestions for opportunities found Financial Benefits

Problem Definition

Shipping costs in May increased $61k due to excessive overnight shipments of CPE

Stock requirement analysis is manual, time consuming, and cumbersome

Root Causes
Unstable Supply Chain Shipping costs in May increased $61k due to excessive
overnight shipments of CPE
> Stock-out due to:
Delay in approving PO Delay from Vendor in getting the PO in their system Delay in normal vendor shipping time frame

Re-Stocking analysis is manual, time consuming, and cumbersome Systems provide pieces of data that must be manually manipulated
in Excel to obtain: > Field shipment orders > Stock replenishment quantity

Current Process High Level

RICH PICTURE OF INVENTORY SYSTEM (System # 1 )

Start

Sales

Sales Person enter info. on MSS

Information Systems

Inventory Inventory Gets the report Of products needed for two week period

Inventory depletes stock from Warehouse Using the Replenishment System

Inv. Package the Product

Sub- System 2

Sub System #3

Field Tech. Change MSS Equipment from Available to In Service

Sites Receive Orders To install equipment

Market Sites enters equipment into MSS as equipment Available

Market Sites Receive equipment

Distribution to different sites

Inv. Ships the product to Market Site

Field Tech. Goes and Install Equipment

Field Tech. Deletes Equipment From MSS.

Nuvox Bills the customer Nuvox Bank

Current Process
INVENTORY HANDLING PROCESS
Inventory goes to MSS and pull Reports in order to find what's needed to be shipped to market sites CPE Summary Report is sent to warehouse Electronically Warehouse verifies report with current inventory (Manually) Warehouse prepares material to be shipped Warehouse ships the product/s to market sites Market sites receive equipment and enter it into the system Request of installation is needed and Market site assigns serial # to customer PO and change the classifications Field Technician return to the system and delete part from the system.

Non Value activities Chance for Improvement

End

Market site installs equipment

Non Value, but not affecting the process

Not Installed Report (NIR)

TSP Schedule Drillable Report

Installed YTD Report (IR) Supplier receives POs and send back a confirmation email with delivery time

Cleaning Reports

Warehouse creates POs of inventory that will be shipped.

Financial receives POs electronically

Yes POs approved? No

Warehouse receives confirmation electronically

Warehouse fax the POs to Supplier

Supplier prepares and sends equipment

Warehouse receives equipment and store it

End

Combine all TSP Reports into one Called Total TSP

Delay Process

Warehouse keeps copies of open POs

Confirmation notice is store on the corresponding Open PO

Conbine Total TSP into NIR

Warehouse attached closes the PO with the receiver from supplier.

Combine IR into NIR

Rename NIR to CPE Summary Report

.1

.5

40

.5

.25

50.35hours/ 6.3 Days

.5

.25

40

.1

.25

40

160

261.72 hours/32.71 Days

NVA= 3 TNVA=3 VA=0 TVA=0

NVA= 0 TNVA=3 VA=.1 TVA=.1

NVA= .5 TNVA=3.5 VA=0 TVA=.1

NVA= 1.75 TNVA=5.25 VA=.75 TVA=.85

NVA= .25 TNVA=5.5 VA=0 TVA=.85

NVA= 40 TNVA=45.5 VA=0 TVA=.85

NVA= .1 TNVA=45.6 VA=0 TVA=.85

NVA= 0 TNVA=45.6 VA=.25 TVA=1.1

NVA= 40 TNVA=85.6 VA=0 TVA=1.1

NVA= 160 TNVA=245.6 VA=0 TVA=1.1

NVA= 1.5 TNVA=247.1 VA=.5 TVA=1.6

May situation

Balance RCP

-103

-206

-103

90

90

90

90

206

206

Demand 90 April

90

90

90

103

103

103

103

May

June

Supplier Lead time increased 2 weeks. Internal Approval process was delayed 1 week from our normal 1 week period. This causes overnight shipments from China and to US market

Improvement Opportunities

Quicker PO approval process Automatic shipping and re-stocking analysis Decrease supplier lead time Utilize bar code scanners to integrate with inventory system

Improvement Actions

Develop fully automated daily report to provide re-stock amounts and field shipping details.
Field Shipping detail:
> > > > > > > Order # CLLI TSP Date Market Equipment Part Number Quantity

Re-Stock Amounts

Enhance CPE approval process.

Decrease time from PO request to submission to Cisco:
> Provide Harold with unilateral authority to replenish stock to approved stock levels
Generate daily/weekly reports to advise executive management of capital commitment

>

Obtain SLAs from Operations/Finance approval management to work Pos quickly

Special capital purchase circumstances, such as TitleMax, will be handled ICB

Pursue new Cisco supply strategy to reduce lead time to delivery.

Provide minimum of an 8 week notice for shipping forecasts

Why Safety Stock is important

Safety Stock Balance RCP
180 26

Stock Recovery
0 0

180

180

180

180

77

90

90

90

90

103

103

Demand 90 April

90

90

90

103

103

103

103

May

June

2 weeks ahead we see a change in demand and we place an order to compensate safety stock. 26 Supplier has been committed to supply every week. But what if they fail? We place and order for material taken from safety stock. What if they fail another week. We use remaining stock plus the one that came in. This Model shows that we are covered for two week period.

10

10

Contingency Plans
We considered the possibility of alternative company to stock equipment. Based of annual cost we did not considered beneficial. We will have safety stock of 3 weeks for the following products: 2431-8 Safety stock will be distributed as follows: 2 weeks on ware house 2431-16 1 week on the field. vwic-1mft-t1 vwic-2mft-t1 2432-24

1. 2. 3. 4. 5.

11

11

New Inventory Process

Sub-System # 3

Start

Inv. Goes to the System and gets a report of what is needed to ship for the market sites

Inv. Ships products and enters data into Inventory Control System (Excel Spreadsheet)

No Is there any product colored Red? Save the document and exit. END

Yes

Create a PO for what is indicated in order to replenish Safety stock

Note: This procedure assumes Weekly shipments from Cisco.

Fax PO to Vendor And notify Financial of purchases made.

Update Inventory Control System

Monitor POs for fast delivery.

Receive Equipment and store it

End

12

12

Summary
Enhanced PO approval process Automated Field distribution reporting
Eliminated manual labor increasing accuracy

Automated the re-stock analysis system

Optimized stock levels Minimized capital commitment

Decreased supplier lead time

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