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Monitoring supplie expense

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This topic contains 7 replies, has 6 voices, and was last updated by  BritW 11 years, 9 months ago.

Viewing 8 posts - 1 through 8 (of 8 total)
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  • October 10, 2007 at 10:22 pm #25553

    lin
    Participant

    Is there anyway to use sigma techniques to monitor supply expenses, to properly make sure that supply expenses are inline, to make sure that they are under budget or within budget guidelines other than the “old fashion way”?
    BillT
     

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    October 24, 2007 at 3:46 pm #61747

    Perryman
    Participant

    Hi Bill,
    Not sure what you mean by the “old fashioned way” but you could plot your historical spend data on a control chart to see if there are special causes in your spending.  You could also plot on a time series chart to figure if there are patterns such as end of month or quartlerly spend sprees.  You might also what to look at these spend patterns in comparison to how budgets are allocated and re-allocated to see if the process drives certain behaviours – and spend.
    I have seen yearly budgets allocated on historical spend, so if you don’t spend, you don’t get it types of behaviours..
    Hope this is the type of advice you were looking for.
     

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    October 24, 2007 at 4:26 pm #61749

    GDS
    ★★★★★★★★★★
    Participant

    Bill,
    Not sure if this is what your talking about, but one thing we did with supplies was to determine the correct on-hand qty. We collected the data on daily, weekly & monthly use of each item and calculated what we wanted our on-hand qty to be taking into account the lead times on each item. Our analysis results showed we had six months of inventory on items that had two day lead times (however we were ordering replacement supplies each week) further analysis revealed that we had a vendor change and our lead time went from three months to two days, but nothing was put into place to align our re-order points.
    Now for the overall budget monitoring process, we have a +/- 3% of total budget spend each month, we allow for some variance due to billing delays (budgeted for this month, paid next month). Any line item outside of the set range (+/- 3%) requires a detailed comment. (Natural gas prices went up, electricty rates, volume increase etc…)
    Hope this helps.
    GDS

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    October 24, 2007 at 6:11 pm #61750

    BillT
    ★★★★★★★★★★
    Participant

    Hi,
    Thanks for the insight.  How did you determine the correct on-hand quantity?  Do you mean you determined what qty you had on-hand at a particular time and monitored from that point?  Did you determine what you “wanted on-hand” and monitored from that point?  It may seem like the same question but it is not.
    Bill
     

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    October 24, 2007 at 6:31 pm #61751

    GDS
    ★★★★★★★★★★
    Participant

    We took historical usage data, number of items used per day, per week, per month, calculated the basic stats (mean, stdev). Mean + 3 stdev = our 95% CI stock level. Item by item we analyzed what we wanted our safety stock level to be based on how critical the item is and the lead time.  
    So item “A” calculated to be 250 units per week, we are 95% confident that if we start out Monday with 250 units we will have enough supplies to last all week.(Item “A” has a two day lead time) Also you have to consider lead time and minimum order qty of the supplier, Our items safety stock levels range from 3 days to 3 weeks.

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    October 24, 2007 at 6:37 pm #61752

    BillT
    ★★★★★★★★★★
    Participant

    Got it, great idea!  I was thinking some what in those terms but was not a 100% sure.  Any ideas on monitoring overtime?

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    October 24, 2007 at 8:58 pm #61754

    DaveAllah
    ★★★★★★★★★★
    Participant

    hi
    try fish bone, it is old but still do it best
    yours
    DaveAllah
     

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    October 25, 2007 at 6:54 pm #61755

    BritW
    ★★★★★★★★★★
    Participant

    Was 250 the minimum stock order?  Wondering why you would purchase for the week if you had a lead time of 2 days.

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