Inventory in the real world - H. Milton Stewart School of Industrial

Report
Todd Nowicki
Director of Supply Chain
SP Richards Co.
My background
 Work experience -24 years inventory experience
 Merchandising Mgr- Retail
 Production Supervisor –Service Industry
 Production Scheduling- Automotive tier one supplier
 Materials Manager, Customer Service MGR and Director
Supply Chain- Consumer products
 Director of SC –Wholesale Industry
 Education
 BS in Operations MGMT from NIU
 APICS CPIM certified
 UT Executive education program for Integrated SC MGMT.
GPC 2010 Sales = $11.2B
Automotive
Parts Group
$5.6B
Industrial
Parts Group
$3.5B
GPC Net Sales by Segment
Office Products
Group
$1.6B
Electrical/Electronic
Materials Group
$.5B
AUTOMOTIVE – 50 PERCENT
MOTION INDUSTRIES – 31 PERCENT
S.P. RICHARDS – 15 PERCENT
EIS – 4 PERCENT
S.P. Richards Company Timeline
1848
1939
1975
1989
1996
2004
S.P. Richards Co.
founded by brothers
S.P. and J.J. Richards
Company acquired
by Rhodes family
Company acquired
by Genuine Parts Company
SPR annual revenue:
$30,831,0000
$500 Million milestone
is reached
$1 Billion Milestone
is reached
$1.5 Billion Milestone
is reached
1920
Wholesale Paper Division
Launched
1940
Wholesale Office
Products Division
Launched
1976
Major expansion across
the U.S. begins
1995
S.P. Richards acquires
Horizon USA
1998
2008
S.P. Richards acquires
Norwestra
S.P. Richards
acquires OHenry, PPI,
and Action Wholesale
SPR Product & Customer Mix
Furniture
12%
Power
Channel
15%
Technology
Products
32%
CBS
9%
Independent
Dealers
85%
Sales by Customer Segment
Office Supplies
47%
Sales by Product Category
Distribution
Fast
Facts
41 Distribution centers in

the US and Canada
 Over 2.5 million cartons
shipped monthly
 Over 300,000 cartons of
shipped UPS
 5.5 million square feet in
Distribution footprint
 Over 1,000,000 physical
locations company wide
Delivery map
UPS Nationwide Coverage
95% Next-day delivery
Via UPS Guaranteed Ground service
One Day Service
Two Day Service
Three Day Service
Inventory Fast Facts
 Over 40,000 active items
 Over 900,000 skus
 Average inventory of $313M
 Annual Inventory Write Off
of $800k-$1.2M
 Turns of 4.4
 Goal of 5 Turns by 2014
 Need to remove $23M of
average inventory to achieve
5 Turns at current COGS
growth rate
Top 10 Real World
Obstacles to hitting
your Turns goals
Number 10
Lack of reliable data
SPR Systems
Manhattan
Warehouse
Management
System
PeopleSoft
Financials
DataMagine
Document
Imaging
IBM
Websphere
Product
Center
SPR Dealer
Services
Sterling
Multi
Channel
Fulfillment
PROS
Analytics &
Price
Optimizer
Manhattan
Inventory
Optimization
EDI
Gentran
Integration
Suite
Business
Objects &
Cognos
Reporting
Number 10 Continued
Lack of reliable data
-We use different and independent operating systems
to run our business
-Non integrated systems allow for gaps in data
between departments
-Possibility to have 4 people working off of 4 different
sets of data
END RESULT: Skus become over stocked, undersold and
left active longer than they should be.
Real World Obstacles
Number 9
Sku proliferation
 Product Management never saw a sku they did not
love
 Line completions
 Full tool box for salesman
 Good, Better, Best
 Private Label vs. Branded
Real World Obstacles
Number 8
Inventory Management is not a priority for other
departments
Hall of fame quotes:
 “I can’t sell a Turn” - Sales VP
 “Stack it high and watch it fly”- General MGR
 “We have to have enough inventory to look like we are
in this business” –Merchandising VP
Real World Obstacle
Number 7
Misguided best intentions
Non Supply Chain Departments making SC decisions
- Merchandising decisions to discontinue
-MID decision to not discontinue
-Global procurement packaging decisions
Real World Obstacle
Number 6
Lack of Supply Chain Education
Internally
-”Island of misfit toys”
-Educational enhancement not a strategic goal
Inter-departmentally
-Salesman question
-VP of Brand request
Real World Obstacles
Number 5
Buyer/Planner Fear
-Service Trumps Working Capital Performance every
time
-Buyers stature vs. their field counterparts
- Customers are like elephants
-Long Import lead times equal large safety stock
Real World Obstacles
Number 4
Inability to predict sales
Quotes from the Salesmen HOF:
-” I don’t have a crystal ball”
-”Why would you ask me? How do I know what the
customer will buy?”
-”You are the one with the algorithms and the fancy
forecasting system, you tell me”
S&OP is still not being embraced
Real World Obstacle
Number 3
Mismanaged or unmanaged Life Cycle policies
-Poor performance of New items vs. projected sales
-Dead and dying sales trend
-Failure to create different stock strategies for Low
volume High dollar items
Real World Obstacle
Number 2
Departmental Silos
-Sub optimal policies and procedures
-Lack of empowered employees to fix what is broken
-Pursuit of excellence vs. continuous improvement
Real World Obstacle
Number 1
Conflicting Goals
Sales and Profit vs. Inventory
-Uneven weight of the “Triple Crown”
-Pressure to buy to growth tiers
-Low price vs. “Warehouse Club” quantities
-Keep the factory absorbed
-Buying ahead of Price Increases
Ways to Overcome Top 10
Obstacles
10. Lack of Reliable data
-Prioritize data cleansing
-Move to a single data warehouse
9. Sku Proliferation
-Use GMROI to show return on carrying inventory
8. Inventory is not a priority for other depts.
-Set inventory goals by Product Category, Brand or
Customer
Ways to Overcome Top 10
Obstacles
7. Misguided best intentions
-Document processes and correct behaviors
6. Lack of SC education
- Join Professional societies
-Certifications
-Get on the agenda of other departments monthly
meetings
5. Buyer/Planner fear
-Empower employees
-Coach, Correct and Reward risk
Ways to Overcome Top 10
Obstacles
4. Inability to predict sales
-Establish S&OP
-Work directly with key customers
3. Mismanaged Life Cycles
-Manage the extremes and exceptions
2. Departmental Silos
-Break down Barriers
1.Conflicting Goals
-Team goals vs. individual
-Educate other areas
Metro Atlanta Chamber – Economic Development
Targeted Industry Clusters
Global Commerce
Recruit U.S.-based
operations for foreign
companies for:
• Supply Chain
• Advanced
Manufacturing
• Technology
• Bioscience
• Health IT
• Corporate Operations
• Business Services
Assist Atlanta-based
companies to a business
abroad.
Supply Chain &
Advanced
Manufacturing
Technology
• Digital media and
content
• Internet and
Supply Chain:
network security
•Supply chain management • Software
development &
software, hardware and
engineering
services
• Wireless
•Air cargo carriers and
applications &
routes
services
•Distribution services
•Transportation & logistics • Financial
transactions
Advanced Manufacturing:
procession
• Cleantech & Renewables
• Food processing
• Electronics
• Automotive
• Aerospace
Bioscience &
Health IT
• Medical device
• Health IT
• Vaccine R&D
• Cardiovascular R&D
• Regenerative
medicine R&D,
animal/plant biotech
• Pharmaceuticals
Corporate
Operations &
Business Services
• Corporate headquarters
• Professional services,
i.e., engineering &
architectural design
• Graphic design &
marketing
• Financial services and
insurance
•
Hal Sirkin of Boston Consulting Group predicts a “manufacturing
renaissance” in America.
•
The economic of globalization are changing fasts.
•
“Sometime around 2015, manufacturers will be indifferent between
locating in America or China to produce for consumption in America.”
Firms are also trying to reduce their inventory costs. Importing from
China to the United States requires more pipeline inventory.
•
Happy Holidays

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