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business. Strategies in the management of inventories.

Every industry faces its own specific characteristics and situations in regard to deciding how and when to replenish its inventory. However, the problem is similar in most cases, so a generic example we can help clarify concepts and help us decide the best strategy for restocking.

Consider Company XYZ, which has a portfolio of 1,500 products to market that offers a comprehensive manner (ie, not specialized for a particular client) through a network of ten distribution centers throughout the country coverage . In general, their products face highly seasonal and aggressive competition, increasing the variability of demand and consequently their difficulty planning.

In recent years, the market has been demanding more variety, which has forced the company XYZ to focus on innovation and generate an average of 20 new products per year.

A situation such as XYZ Company involves a high complexity in the planning, management and execution of the processes of their supply chain. A critical aspect of planning is deciding how and when to replenish inventories in distribution centers. This definition follows directly impacts business results:

• Service level: product availability at the time in which the client needs (according to a pre-service offering defined).
• Investment in inventory : The availability poorly planned investment generates a surplus of inventory, which in addition to the cost that this entails, it reduces the speed at which the business becomes the asset in flux.
• operating costs: Poor inventory planning results in inefficiencies in the operation of distribution centers it is incurred in excess or lack of capacity and additional costs such as transfers of products, differences inventory, overtime, etc..

Planning inventory

Before choosing an inventory strategy is necessary a couple of previous definitions:

1. decoupling point the supply chain: What items must be produced to order (make to order) and what items should be produced for inventory (make to stock). (See Figure 1).
2. design the distribution network: Where should keep an inventory of the products under the scheme to make stock.

Once you have made these decisions for each product (which is held in inventory and where) it is necessary to define the mechanism for managing a strategy to continue to make to stock, is ie the inventory planning process. The

inventory planning process part of a macro planning process supply chain. While not unique, it is one of the most important, the rest of the planning processes (distribution, capacity, production, materials) depends largely on inventory strategy is chosen.

To simplify the example, all XYZ company's products are make to stock and all should be available in each of the ten distribution centers. Therefore, the inventory planning process is critical to keep the business profitable and competitive. This process should answer the following questions for each product-distribution center:

1. How much inventory should be?
2. How often do you have to replenish that inventory?
3. How should generate the replacement requirement?

Strategies Inventory

To answer the three questions is necessary to start from a common element: the demand plan or forecast. One of the raisons d'être of the inventory is to ensure the supply of a product with uncertain demand. A more uncertainty, more inventory. Therefore, any strategy of inventories should be based on a demand schedule that exists as formal process within the company.

XYZ Company maintains a demand planning process supported with a tool specialized information technology forecasts and the share of sales, service, marketing and logistics

Products A few features remain variability and uncertainty, so stay low and forecast errors are called functional products. B products maintain a high degree of innovation and high degree of uncertainty facing, so that on average forecast errors remain high. Products C are quite erratic, mainly because of the low volume and uncertainty in their frequency of travel.

Given this scenario, the XYZ company must decide how to use the forecast for the definition of how, when and how to manage inventory. At present, due to information technology tools that support the operations of the supply chain, there are two different ways to use the forecast for inventory decisions:

1. Traditional (DRP ) The DRP (Distribution Requirements Planning) is usually in the form of distribution of any ERP and uses the forecast to calculate the maximum and minimum to keep each product in each distribution center. This calculation can be dynamic parameters (recalculated every day) or static (calculated once every 3 or 6 months out and feed the system). The schemes supported by a DRP are basically two: Point of order (with variations of maximum and minimum fixed amount, among others) and fixed rate (one filling or a maximum fixed amount every X days).
2. Replacement for prognosis: This method is supported by technologies APS (Advanced Planning Systems) and uses the forecast for planning

Although the replacement of prognosis is presented as the best alternative on the market, has one major drawback: it is 100% sensitive to the forecast error. Imagine the excess inventory and additional costs for planning in this way products with 300% error. This results in poor utilization of chain capabilities and a poor ability to respond efficiently to uncertain demand.

other hand, the traditional method, although cash, inventory tends to be on products with low uncertainty and low forecast error, it requires a safety stock to protect against the time range. What is the best strategy for XYZ company? The answer must meet the following criteria:

1. Ensure service
Maintain the efficiency
3. be manageable, manageable

strategy XYZ Company should consider the demand characteristics of the products and the forecast errors. The possible elements of a strategy that meets the above criteria is:

1. Focus the demand planning process to reduce the error of products A, B and input, leaving only the products C purely mathematical prognosis. This action should have clear targets for reducing error and responsible in each area.
2. Using the method to forecast replacement products for products A and B with errors less than 30% -40%.
3. Using the traditional method of product B with errors greater than 40% and for product C.

Conclusions

inventory The best strategy is one that understands and considers the characteristics of demand for the products and their complexity. Due to the impact that the inventory has throughout the chain, this must be a business critical process to ensure proper maintenance of the systems that run it.

A company such as XYZ requires technology tools that will help support the great complexity of managing 1,500 products in 10 distribution centers with features of high uncertainty and a high rate introduction of new products.

Finally, the end of the inventory planning process should be, as the supply chain to maximize customer service, optimizing resources and capabilities that the company devotes to it. A correct definition of the strategy inventory is a key element in achieving these objectives.

Source: www.lrmconsultorialogistica.es

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Factors influencing design the area / pick process (preparation orders) Segmentation

In this article we will see the factors that influence important when designing an area / process of picking (picking).

The proper design of the area / process picking is one of the most important in the design of a store, and usually between 40-60% of the costs associated with store order picking (See article Costs associated with a distribution center / warehouse. Importance of the cost of picking). For this reason, it is important to consider the following factors:

Number of references: the greater number, the more complicated is the most important operational and control it (only to maintain the stock controlled as to avoid errors that affect the level of service for our customers).

Types of orders: the greater the atomization of the order (highest number of orders and fewer units / order) more complex and less productive is the preparation. As an example, we might comment that it is easier to prepare orders for full cases or pallets full of references about having to keep picking of single units. With the addition that there are fewer references per order, more often the ratio of meters walked by reference.

model of service offered to customers: the shorter the delivery time from receipt of order to delivery to the customer, the more complex preparation.

Competitiveness: is closely related to the previous point. Normally in competitive sectors Delivery time is usually gradually reduced and also any inefficiency in the process can result in costs that the market will allow. Usually most of the movement of merchandise in the store do not add value to the customer and it will not be willing to bear the cost of our inefficiencies.

Types of products: the weight and volume of products, packages (boxes, pallets, or any other group) as well as special storage characteristics, economic value .. . This affects the proper equipment to move merchandise and is an important factor to consider in order to maintain acceptable ergonomics and not break any rules. Storage characteristics (temperature controlled, isolated areas for incompatible or dangerous goods ...) or economic value (storage areas secure, locked) may require separate zones that certain types of products.

product Zoning: the need to zone the area of \u200b\u200bpreparation in terms of:

product catalog / catalog vendors or product families. This will also speed up the placement process (since all the references received from a supplier are close) can also accelerate the development in certain types of orders.

Compatibility: as mentioned in the types of products, some products may not be compatible to be stored together (food and drug)

Complementarity: In the case of references belonging to a kit Mounting and always go together.

ABC Rotation of output lines: the most common segmentation, which involves applying the Pareto law for references to more output lines and minimize trips together during preparation. View Article Segmentation ABC and the law Pareto

Size / Weight: as seen also in the type of product. This may be necessary to form stable loads (better to optimize the volume) and heavy products are not on light products not to cause damage.

As customer needs: for example taking a preparation course to facilitate replenishment in a retail outlet.

type of rotation and tracking: FIFO, LIFO, FEFO ... having to handle dates, keep an established order in the preparation or be forced to take control of batch traceability, can force us to have to place products in a certain way or adopt certain technologies to ensure a reliable traceability.

Unit Load / transport: we must not forget that what it is to obtain a comprehensive cost when providing products and this may require reconditioning or preparation in a which, although not the most efficient from the standpoint of the store if it is taking into account the full costs.

Space Available: not always part of a white background to design a store and picking area. Normally we have built a ship and its limitations (m2, columns, height ...) and even if one starts from scratch (building a new store) there are constraints arising from the cost of m2, parcels available, legal constraints on surface height and buildable ...

About LRM Consulting Logistics:

LRM is a logistics consulting firm specializing in providing customized solutions to suit the specific needs of its customers, while maintaining a holistic view of the supply chain, and optimizing the overall cost of operation. Its main services are:

Integrated Logistics Consulting

Project Management

Consulting and systems implementation.

Engineering

Outsourcing

Training

Source: www.lrmconsultorialogistica.es

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ABC and the law of Pareto.

In Logistics, it is customary to speak of many ABC segmentation rate (sometimes called simply CA): ABC of entries, Stock ABC, ABC outputs, customers, and that breaks ... that does not give much information. In this article we will try to clarify that ABC segmentation and how it's done.

ABC A segmentation is a tool that helps us focus on what is most important. It really is an application of the Pareto law, or the law 80/20. This law says that "20% of something is always responsible for 80% of the results is that 20% of something is essential and 80% is trivial. For example, if we talk about sales, 20% of products account for 80% of sales and the other 80% only represents 20% of sales. So the first 20% of products are the ones who should be most important for the company. This law is based on empirical knowledge and do not always follow them exactly. Sometimes it is 80/20 and is 80/30...depende of each particular case, but there is a "little" representing a "lot"

For ABC segmentation, which is usually done is defined as:

Class A is the% of that something (eg products), which represents 80% of the results (ie sales)

Class B: the% of that something (products), regardless of class, which represents 15% of the remaining results (sales)

Class C: the rest of% of that something (products) without considering the class A and B to represent the result left: 5%.

When we talk about AC segmentation what is often considered is that CLACE C is the set of class B and C above. That is, A accounts for 80% of the sale and C 20% (Law 80/20).

Redial, that the ABC is always considered a given period. For example, I can do an ABC sales every 6 months where I check which were the products A, B and C in that period (The classification may change if we consider an earlier or later period.) The ABC is both a period associated.

Later, we will show a video / screencast as this is done using Excel while we explain in a more applied, but for now we will see some applications:

Shopping:

shopping is widely used in the ABC reference / purchase price (amount purchased in the period by the unit cost)

References A: represent the references that account for 80% of the value (€) total purchased. These references are in you have to focus the purchasing department, as very few references (about 20%) and any action to make on them will have a major impact on the result of purchases. Typically try to negotiate great prices, try to have some stocks of these references (being very much money would be inmovilidado), seek partnerships with suppliers to try to reduce the overall cost ...

References B: represent 15% of the value and while not as important as the A, must try to control them. For example, establishing a proper frequency of orders, making a deal with suppliers with a lower frequency than the reference A. ..

References C: are the "commodities" representing only 5% of value. The purchasing department is unaware, stock associates a minimum and the system alerts you when you come to order.

used Another ABC ABC shopping is a supplier, where it could be that 80% of quality problems or incidents are caused by 20% from suppliers. In some companies this is known as the ranking of suppliers "

Inventory Management:

For example, an ABC of stocks (both in money in coverage), which references are definiento more money "immobilize" or references are those that have more coverage (days of inventory). Many times what we usually do is Matrices ABC (when parent is usually AC) which is also called cross-ABC. Ultimately what is done is to cross the two ABC results for each quadrant and implement different strategies for each quadrant. For example, a reference that is AA, A in coverage (coverage is very high) and A in stock value, requires an urgent strategy to lower inventory days of such a reference as we have much more than we need and stock is very expensive.

in inventory management are used to define other cross ABC strategies, depending on the value and demand variability, or between the rotation of the reference and demand variables but we let them to a second paper.

Store:

can also use several types of ABC, but most important is the ABC of cumulative output line (picking) by reference. This is usually the most important because most of the costs of a store (about 40-45%) is usually in the order picking tasks. In the preparation of orders, the "cost-driver is picking line, which is requiring a journey to catch a lot. It is much more expensive to go 100 times a day to take a drive in a reference to go 2 times to get 50, so they use lines and no units. When you have many references is essential to define an ABC so that:

References A producing 80% of output lines are in place quick and easy (ergonomics) accessibility. (For example, dynamic shelves with Pick-to-light)

References B, accessibility media.

References C, often a very large number of references which produces only 5% of the outputs, which are generally put in an area part, picking racking (minimizing investment) and where what is usually sought to minimize the space occupied

Source: lrmconsultorialogistica.es

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Trends in packaging and packaging

Currently, 75% of finished products require packaging. Of these, 90% are used for food and beverages, which makes these two branches relating to the development of packaging.

manufactured in Mexico is 8,500,000 tonnes of packaging annually, are distributed as follows: glass, 38%, paper and cardboard, 26% plastic, 16% wood, 14% metal, 6%. The commercial value of this industry is about 490 pesos.

By: Luis Castro

According to the Mexican Association of Packaging (AMEE), today we can speak of three factors determining the trend in packaging:

Sustainability. Companies looking to reduce the environmental impact of packaging with lower energy consumption from production raw material to disposal container. This is not only an environmental purpose but also as a critical element of competitiveness, the aim is to have a balance between efficiency, functionality and cost.

Marketing. The packaging is a key element in the consumer experience with the product from your choice at the point of sale, purchase, transport and storage, to disposal. Therefore, the success or failure of a product also depends on the image you present and provide comfort design.

Convenience. Changes in lifestyles, the new geography, urban population growth, household composition, changes in work environments and awareness that has been taken with regard to health has affected the characteristics of the goods and, therefore, of the packaging.

"Each day looks better preserve food. It's right there where packaging plays a key role in innovative designs and materials are also looking to save and preserve the freshness of the product and give the user a solution, "said Jorge Martinez, director general of the AMEE.

Alquicira Edith Ponce, a researcher Department of Biotechnology of the Autonomous Metropolitan University (UAM), Iztapalapa campus, notes that the development of packaging must ensure not only product protection to the environment, but safety issues and food safety, provide consumer information about the composition of food, brand or media consumption and have an attractive design that makes a difference.

Active and intelligent

global warming and the high levels of contamination led to the packaging industry to develop initiatives to counter these problems. The idea is to achieve optimization of materials, energy use, waste generation and reuse them.

Arturo Dávila Villarreal, representative of Support, Business Commitment to the Integrated Management of Solid Waste, said that sustainable packaging are those that are intended to optimize resources and minimize waste in the life cycle products.

William J. Roman, a researcher at the National Polytechnic Institute (IPN), believes that a package must be sustainable worked with ecodesign. This concept allows you to select materials with low impact, reduce the quantity and optimize processes and distribution systems.

José Martínez, director of the Office for Latin America Packaging Machinery Manufacturers Institute (PMMI), adds that there is a clear tendency to criticize the package, in the sense of considering whether or not junk, and disagreements regarding this issue are ongoing.

Alquicira According to Ponce, one of the main trends in the evolution of the packaging industry has to do with the development of materials biodegradable, because, apart from the factors of environmental protection, upgrading and variability of oil costs and a reduction in proved reserves of this resource.

"Scientists and industrialists have been given the task of developing packaging materials to replace plastic films through the use of biopolymers from renewable resources. The film materials may be polysaccharides such as starch and chitosan (element found in crustacean shells) and cellulose or its derivatives, or made with protein and casein protein whey, collagen, gluten and zein. Other packaging materials are natural polymers or bioplastics such as polylactic acid (PLA), the polyhydroxyalkanoate (PHA) and polyhydroxybutyrate (PHB), obtained by microbial fermentation with wild microorganisms or genetically modified organisms, "says Ponce.

Dolores Vidal explains that Mexico has 300 biodegradable packaging options, such as food, substitutes for plastic bags, disposable cups and plates.

However, the director AMEE General adds that regarding the issue of biodegradable there is an argument, because some products are based on renewable materials such as starch or corn, sometimes consume more energy than otherwise, which is not evaluated.

Another trend within the industry of packaging refers to the active packaging with applications designed to give greater functionality. A Alquicira Ponce say, the traditional packaging concept has been transformed into the active packaging by adding antioxidants, enzymes, flavors, nutraceuticals and antimicrobial agents, as well as oxygen absorbers and humidity, among others.

"active packaging concept covers a wide range of possibilities, all with the aim of increasing the shelf life by protecting against the officers directly responsible for the alteration as rancidity, discoloration and development Microbial. An advantage of using active packaging is to reduce and completely eliminate the need for direct addition of preservatives in the formulation of foods, enabling the production of so-called 'clean label' for low or no content of conservatives, "says UAM researcher.

One of the more used is the smart packaging, these are classified according to their properties, components or packaging material. Essentially it seeks to generate time-temperature indicators, microbiological quality and levels of oxygen or carbon dioxide. "There are already packages open when cooled or heated alone, so you no longer need the microwave. The Italian patent is being marketed in the country, "says the director of PMMI.

Another new trend is one that has to do with nanotechnology. This is typically used in computers can read the special texture of a container, store information and identify data such as lot number.

Vidales says today working on the implementation of chips that allow communication with the container, ie, the chip can tell the consumer the product shelf life, how to use and give recommendations on the content. They could also give the customer instructions on opening the package, among other things.

"Define the elements that create a good package reminds us all that is behind that bottle that can or buy the box daily. We think of the color, size, and, of course, the brand as the main elements to be included packaging design, "says Alfonso Núñez, director of Art of the Delta Group advertising agency.

The color choice is very important in the design of a package, it is largely responsible for that lead to the differentiation between brands of the same class and the construction of their identity.

"An important element in the beverage market is about climate of the country or region where the product is distributed.

For example, in the hot spots presentations tend to be larger, so it is impossible to imagine that by 2010 there are presentations of five-liter soda due to climate change, "says Nuñez .

in the country and is recognized by the drive for innovation in packaging, and proof of this is the contest Packaging star. The award ceremony takes place every year during Pack Expo and the requirements to participate are available at www.amee.org.mx.

AMEE is worth noting that last year joined the Housing Green Awards which promotes and encourages the conservation of the environment and container for export.

NO 'CAN' INNOVATE

"The competitiveness of a country depends on the ability of industry to innovate," argues strongly Roberto Fernandez, director of Engineering and Projects Jumex Group, a firm that intended to innovation in products and processes 2.5% of its turnover.

For

development of their latest developments, the 'Latabotella', the company invested about 20 million dollars. The container had a preparation period of two years before release.

Its development process had a first draft in Europe to find some examples of how it could be a 'Latabotella', mainly in countries like Germany and Spain, although the final design is 100% Mexican.

Fernandez says that the company has committed to the tin and container, as one of the best packages that can be offered to consumers due to ownership per se that has, like the keeping quality and resistance. "Hence the idea of \u200b\u200bbeing able to create and innovate a can that could be opened, closed and use a material like steel, which, although you have certain restrictions, was adapted from the original design we had planned," says Fernandez.

TECHNOLOGY IMPORT

At the international level there are three leading countries in machinery for packaging: United States (U.S.), Italy and Germany. However, countries like Spain, Japan, China and Brazil have seen their slice of cake.

According to the Confederation of Packaging Machinery Associations (Copama), an organization of different associations worldwide machinery, equipment producing countries such as Japan and the U.S. is for their own markets, while Germany and Italy cover about 66% of international trade.

Mexico imports approximately 480 million dollars in machinery for packaging, of which 25% come from U.S. manufacturers, 25% of Italian companies, and the rest of Spain, Japan, Germany and France.

The country imports 80% of the technology used to package products and also one of the largest buyers of U.S. equipment. The packaging industry is looking for specific features in the new machinery, particularly efficient use of energy.

modular design also aims to machines that can be flexible, because we must remember that companies look make more of a product or packaging in the same production line. Another great feature is the increased speed and efficiency, ie, changing the devices that were tires electromechanical and flexible, to suit every need of filling.

"It is also seeking to automate tasks, such as inspection, which does not have to take a person to review defects, but that, through automation, these tasks are given for granted, "says Martinez.

Edgar A. Jürgensen, general director of Krones Mexico, company that offers systems, equipment and solutions for filling and packaging industry, indicates that large companies need to have a comprehensive solution technologies from different countries.

mentioned that small and medium enterprises (SMEs) are increasingly understanding that gives you the advantage against the competition to have a complete, integrated solution, rather than taking several modules for same manufacturing process.

"Before, when purchasing a machine was not feasible to make a different product that was targeted by the team. Today we can manufacture various packaging, as the market demands it, and you can ask the machine manufacturers to give them the opportunity to work in presentations of packaging, because the brands want to win a place in the market, "says the director of Krones.

The Italian Association of Manufacturers of Packaging Machinery (ICU, for its initials in Italian), the voice of his representative Guido Corbella, mentions that the Italian manufacturers of packaging equipment and technology to consider this country as the eighth largest market, accounting for 5.7% of its exports.

For its part, Isidre Puigdemasa, representative of the English Association of Machinery for Packaging, Packaging, Bottling, Carton and Graphics (Amec) reveals that Mexico has become the second country that imports more English machinery for the packaging industry, after France.

"EU has always been a leader in coding, so each country, each focusing on certain segments it serves, in fact, for many large companies are complementary. At this point the various international groups are preparing to cope with a more open market in terms of compatibility between devices, "said Martinez.

Mexico has an important leadership role in the packaging industry and packaging, however, must face the challenges include shortages of basic commodities, the fight against piracy and sustainability.

"The development of new market-driven solutions are natural health products, beauty and cosmetics. A new trend in a new type of consumer should be the goal. Its acronym 'Lohas', meaning Lifestyle of Health and Sustainability, is the type of consumer who will demand products that can be recycled and environmentally friendly, but also that they are healthy, "Martinez concluded.

Source: CNNExpansion