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Inventory reduction accrued from Product transfer

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  • #31940

    yoyo
    Member

    Hi,
    A simple brief… there are numerous product transfer from high cost region to low cost region in our company. Basically, we need to transfer the current inventories to our sites. From the past experience, we’ve transfer many of the obsolenscene parts over due to critical time frame. At present, the figure of E & O are huge. Wondering if anybody can guide me on how to go abt these projects by putting a control process in it.
     
    Many thanks
    YOYO 

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    #84738

    Fontanilla
    Participant

    You to figure out how long its taking your inventory to arrive at the high cost site.  Are you shipping the right items?  What is the shelf life of your items and can it be improved?  This sounds like a fabulous project!  Keep us abreast.
    You to figure out how long its taking your inventory to arrive at the high cost site.  Are you shipping the right items?  What is the shelf life of your items and can it be improved?  This sounds like a fabulous project!  Keep us abreast.

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    #84746

    Terry
    Member

    Great project . . . You don’t want to drag the boneyard to another location.
    Here’s a quick suggestion.  Go into your ERP system – You should have a standard E&O report.  If not, do a data extraction of inventory items and usage.  You can set up some very simple rules to get at this:
    1. Excess – If there has been 0 usage in the past 6 months, you might tag that as excess, or you can divide “on-hand” by “average monthly usage over the last 12 months” and calculate “months of supply.”  Then, compare that to lead time.  If you end up with a 4 month supply of something with a two week lead time, that’s an excess candidate.  Then you can go into the purchasing system and push out/cancel POs and planned receipts.  By the way, use Pareto Analysis based on extended inventory value (price x quantity on hand) to prioritize actions.
    2.Obsolete – Anything with 0 usage during the past 12 months is an obsolete candidate.  Again, Pareto Analysis is a great prioritization tool for taking actions.
    E&O projects are great Six Sigma projects.  The way most companies solve tis problem is by reserving for it, vs. fixing root causes.  Hope this helps.

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    #84781

    DColvin
    Participant

    Exellent points….. I just finished completing a project similar to this.  We identified excess/obsolete inventory and returned those items possible to the vendor.  Other items were transferred (sold) to a Sister company for use or sold for scrap.
    We began by identifying any items that were inactive for at least 12 months.  Also those items with short lead times that had a surplus.  In addition we knew of items that we no longer needed and identified them for sale.
    Good luck with your project.  Please feel free to post a response with any questions, etc.

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