iSixSigma

Raw Inventory stock out

Six Sigma – iSixSigma Forums Old Forums General Raw Inventory stock out

Viewing 9 posts - 1 through 9 (of 9 total)
  • Author
    Posts
  • #43671

    IE
    Participant

    Hi guys, since I’ve been here at my first industrial engineering job I’ve noticed the problem of raw material stock-outs affecting my line dramatically time and time again.  I had a conversation with the materials manager asking if there were ways to improve our raw material inventory tracking system, etc., but in the end his answer was, “You’re fresh out of college, you need to understand that you’re going to have these problems.  It’s a fact of life.  This company is the best I’ve seen at preventing parts outages”  I can understand that stock-outs are going to happen because of spikes in demand, scrap factors, etc., but where do you draw the line?  How often is acceptable?  I guess thats up to each individual company…  What have you guys seen?  I want to hear your thoughts on this.
    Thanks, Andy

    0
    #138839

    Elbrin
    Participant

    IE
     These are the very type of questions that the DAMIC methodology is designed help us find the answers to.  Stock-out vs. excess inventory is a sinsative balance.  My first question back to you would be, is it a constraint, meaning are you missing delivery dates, losing sales, or building up WIP down line due to these stock-outs.  If so then improvement is needed.  Where do you start?  Map the ACTUAL process, using SIPOC and Value Streaming.  Don’t ask the materials manager, ask the people that actually do the job where the issues are.  Don’t be affraid to ask the dumb questions.  Opportunities will become appearant very quickly.

    0
    #138901

    lin
    Participant

    Look at how re-ordering is done.  What is the usage rate?  What is the safety stock %?  If it dramatically impacts your line, then it is a problem.

    0
    #138953

    Brit
    Participant

    IE
    Follow Elb’s advice.  Your materials manager is a yahoo.  No inventory stockout should be acceptable.  Yours is most likely a system issue, that with a little investigation can save you a lot of time and effort. In addition to Elb’s advice, also look to your suppliers and see what type of delivery contracts you have.  The realtionships there may tell you something as well.  You don’t want excess raw material stored, but you certainly don’t want to run out.  See what the lead time is gauranteed to receive material and compare that to the lead time of your system.
    Also – a watch out.  If your ops manager/vp isn’t up in arms about th e plant not running because your out of raw material, then sounds like you might be producing for inventory – just an observation with no real data on my end.  This is a worse problem in my opinion than running out of raw material to produce excess stock.  Just a thought.

    0
    #139246

    Bode
    Participant

    I agree with Elbrin.  You should follow the data and not listen just to the material manager.  There are costs associated with stock outs and excess inventory.  Your job is to help quantify each and make a sound business case for the optimal ratio.  Stock out costs to include are sales losses due to missed deliveries, idle time, OT to catch up, expedited shipments of raw materials/final product,   Excess inventory costs to include are loss of capital tied up in inventory, storage and management costs, probability of inventory become scrap due to product changes or damage/deterioration during storage.  There are also things that are hard to put a dollar value on that should be considered such as loss of reputation due to missed deliveries and employee frustration with not having the materials to make on-time deliveries.

    0
    #139251

    Lorax
    Participant

    Andy/IE,
    Be careful not to alienate the materials manager. Unless he is going to get removed in the very near future (unlikely), the probability is that they will be a major player in any solution. The (second) last thing you want to do is to make them oppose any change that is proposed.
    He is a yahoo – yes, but one who is in a position which can make this considerably easier or considerably more difficult. Its better to make an ally than an enemy (thanks RW).
    In saying that, if it is unavoidable, squish him if he’s stonewalling progress.
    Lorax
     

    0
    #139939

    Scott
    Member

    Common question and don’t forget your Lean. Stockouts are a function primarily of mean demand, variation of demand and frequency of receipt. One will hear that the leadtime is critical. Not really, unless the demand varies unpredictably. Note that I say unpredictably. Trends, seasonality and cyclicality are NOT unpredictable. Special events are often predictable, too – AND manageable. Consider plotting the actual demand of the finished goods (Independent demand) on a statistical process control chart (Ignore those that get hung up on normality at this stage.) Then, extend the demand of the components or raw that you want to start improving (Dependent demand.) Oh, by the way, get ready to turn off MRP if anyone is using it to push raw inventory into your system because we are setting you up for a much simpler and more effective pull system. Maximize the frequency of receipts immediately. Now, plot the demand in buckets of the replenishment leadtime on a histogram. Send it to me and I will tell you exactly what your reorder point ought to be and the average inventory you should expect across ordering frequencies. Hide any identification to your product line, please. [email protected]. My name is Rick and glad to help.

    0
    #139942

    Tronan
    Member

    Odd that you would jump straight to a solution.
    Sounds good, but I would add the CoVAR on the front of that paragraph to determine the suitability for the implementation of a pull system.
    It could be simply that the gentleman’s company in question employ’s Muppets in the stores who can’t count, or have defective scales in the store room that are out of calibration causing lineside inaccuracies which a pull system can hide, not solve. There are a whole mountain of reasons to stock outs. They occur in both pull and push systems, there are pro’s and con’s to each.
    Just me thinking out loud,
    T.

    0
    #173559

    zann
    Member

    hi rick
    rpm1jrmsbcglobal.net seems like an invalid address.
    please advise your new email address

    0
Viewing 9 posts - 1 through 9 (of 9 total)

The forum ‘General’ is closed to new topics and replies.