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Tools to use for better inventory turnover management

When it comes to analyzing inventory turnover, every supply manager should think of inventory turns as a measure of how well the company’s products are doing in the market and how well its inventory is managed. The inventory turnover ratio is one of the best indicators of how efficiently a business is turning its inventory into sales.

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Most supply managers today leverage technology such as enterprise resource planning (ERP), warehouse management systems (WMS) or inventory optimization software to track inventory turnover at the item level. There are other strategies beyond just inventory turnover that should be used to ensure inventory levels are optimized.

To keep service levels high and costs low, an inventory optimization solution should be in place to monitor the following:

Demand Forecasting

Historical performance and item level demand can be used to calculate possible future trends, taking into account possible changes or demand variability. In vertical supply chains, supplier communication can be improved to ‘pull’ systems, which manufacture only on demand (and therefore need considerably less inventory). Since most wholesale distributors require inventory to be on hand, refining order-purchasing processes are the fastest way to reduce costs in the supply chain and to ensure demand forecasting accuracy.

Inventory Redistribution

Redistribution helps companies to redistribute items to other stock locations that have greater demand for those items. This process eliminates the need to procure more inventories from the supplier and helps keep inventory item counts low and lean. When the stock is moved from one warehouse location to another, a record still needs to be maintained across all systems to maintain accurate inventory analysis.

Track Inventory Obsolescence

In the unfortunate event that items in inventory have reached the end of their product lifecycle and are classified as “obsolete”, it is important for an organization to work backward to identify why that item is still in stock without associated customer demand. Was it an issue with the forecasting plan, did operations carry too much excess stock or did finance order too much from the supplier to save on a bulk quantity discount? Additionally, inventory items that are scrapped should be written off the balance sheet, to comply with prudent accounting conventions. Optimization systems today can alert managers when item level demand is falling off and large quantities of inventory are still in stock and are at risk of becoming obsolete.

Data Integration

Inventory systems that are seamlessly integrated can easily gather records of items purchased for more advanced inventory control and turnover analysis. Advanced optimization software today is mostly offered as a cloud solution and can be dynamically integrated to almost all older ERP’s or legacy inventory tracking systems.

 

Don’t Just Manage Inventory, Optimize it!

The monitoring and control of inventory turnover are important to the profitability and performance of wholesale distribution companies because it helps to improve inventory optimization while measuring how well the business is generating sales.

In almost all cases, a higher turnover ratio is desired, as this tends to indicate that more sales are being generated by the business. Alternatively, for wholesale distributors that report constant sales figures, making efficiency improvements in the supply chain (speed of response, increased customer satisfaction, reducing supplier lead times, reducing supplier costs or delivery timescales etc.) will also improve the profitably of the supply chain.

Many of these alternative cost savings methods can be implemented with inventory optimization software like easy stock. The ideal inventory turnover ratio is different for every company and should be considered carefully based on relevant industry benchmarks in order to establish whether the company is managing stock levels and stocking policies successfully.

Daniel Fritsch   July 23, 2015

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‘Disappointing’ lack of diversity in supply chain management

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The supply chain profession is largely white male and lacking in ethnic and gender diversity, according to a report. 

A study by consultancy Supply Chain Insights found 57% of supply chain managers were caucasian and only 28% were female.

“Sadly, diversity in the profession remains an issue. I foolishly thought we had made more progress,” said report author Lora Cecere, founder of Supply Chain Insights.

Cecere obtained 386 responses largely through contacts on LinkedIn, Twitter and other social media platforms. Respondents included people working in or studying the supply chain industry.

The largest ethnic grouping in the survey was Asian/ Pacific islanders, who accounted for 23% of responses. Only 7% of respondents identified themselves as Hispanics or Latinos, and only 5% as African-American or black. Another 5% classified themselves as “other” and another 5% preferred not to say.

In terms of age, members of generation X, those born between 1965 and 1984, made up 51% of responses, while millennials, born between 1985 and 2004, accounted for 29%.

Baby boomers, born between 1945 and 1964, accounted for 20% and those born earlier than 1945 made up 0.3%.

Cecere expressed the fear that as she had largely recruited the sample base from her contacts on LinkedIn, women and non-caucasians could have been over-represented in responses and the real picture of ethnic and gender diversity in the profession could be worse than the survey indicated.

This would appear to support a study released in March that featured a ranking of occupations by level of ethnic diversity. It placed senior procurement professionals in the bottom ten. CIPS described these results as ‘disappointing’ and said more needed to be done otherwise the profession risked becoming ‘irrelevant’.

In the Supply Chain Insights study 70% of supply chain employees were satisfied with their careers, but the report also identified notable differences by generation in terms of job satisfaction and what matters in their careers.

Generation X and millennials sought greater work-life balance, fewer hours and greater flexibility to work from home compared to baby boomers.

Millennials sought more coaching and on-the-job training, suggesting an opportunity for employers seeking to recruit top talent.

Supply chain professionals of both genders had similar goals and aspirations, though women were more likely to be concerned about working from home, flexible time and commuting considerations.

Cecere said the study indicated that supply chain management can be just as appealing and satisfying to women as men but the profession was failing to educate young women about it as a career.

posted by Andrew Allen
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KFC reverts to original distributor after chicken crisis

 

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KFC has reappointed its original chicken distributor for some of its UK restaurants after a botched delivery deal with DHL forced the temporary closure of hundreds of outlets last month.

Yesterday, the fast food giant announced it had signed a new long-term deal with Bidvest Logistics, its previous delivery partner, to supply 350 outlets in the north of the UK.

Bidvest Logistics lost out after its contract was put out to tender last year, with KFC deciding to overhaul its UK supply chain and awarding the contract to logistics service DHL Supply Chain.

At the time, KFC had boasted the partnership with DHL and its software provider QSL would “deliver a new level of service”, while DHL said it would “re-write the rule book”.

However, last month, Yum Brands-owned KFC was forced to temporarily shut hundreds of its 900 UK restaurants after “operational issues” at DHL left a backlog of chicken at the delivery group’s sole UK warehouse in Rugby.

It led to a shortage of the chain’s key ingredient as well as other menu items, including fries, coleslaw and gravy, prompting questions as to why it had tried to implement the change to a new supplier with a single, new and untested distribution centre without any contingency plans in place.

A KFC spokesperson said after “working hard to resolve the present situation” a decision had been made in conjunction with QSL and DHL to revert the distribution contract for up to 350 of its restaurants in the north of the UK back to Bidvest Logistics.

“The decision will ease pressure on DHL’s Rugby depot, to help get our restaurants back to normal as quickly as possible. As it stands, over 97% of our 900 restaurants are now open for business, although there will be some limited menus before we are back to business as usual,” they said.

The spokesperson added that the company would continue to operate with QSL and DHL for the remainder of its restaurants in the country.

Meanwhile, Paul Whyte, Bidvest Logistics business unit director, confirmed the company would “provide renewed supply” to KFC from 26 March.

“We are delighted to welcome KFC back to Bidvest Logistics. As the UK’s leading food service logistics specialist we understand the complexities of delivering fresh chicken … we will provide them with a seamless return to our network,” he said.

A DHL spokesperson said that together with its partners it remained “fully committed to delivering excellent service to KFC’s remaining 550 restaurants across the UK”.

John Perry, managing director of consultancy Scala, said: “It puts DHL in a difficult position, as it is effectively being bailed out by a competitor, but it is also potentially harmful to its reputation and the success of winning other business. Splitting the operation between suppliers at this stage, after implementation, raises the question again as to why the transition from Bidvest to DHL wasn’t phased in and whether the proposed solution can be made to work.”

posted by Su-San Sit