Stock Management SFD Module F Training Management Tools

1. Stock ManagementSFD Module F TrainingManagement Tools Presented By: Wehib Mohammed ICRC Logistics Addis Ababa

2. Stock Management Is defined as • management of all the items that flow through a logistics systemi.e. procurement, warehouse, transport etcthe organization uses to fulfill its mission.

3. Five RIGHTS • the RIGHT good • the RIGHT quantity • to the RIGHT place • at the RIGHT time • for the RIGHT cost

4. Contents • Inventory Control Management • Order management (follow-up) • Store (Warehouse) Management

5. 1- Inventory Control management enable us • when to order, • how much to order and • how to maintain an appropriate stock level of all products to avoid shortage and oversupply

6. The worst thing that can happen to a vehicle, and that we can prevent, is running out of fuel. • Similarly the worst thing that can happen in a centre is to have stockout (running out of stock).

7. Maximum – Minimum Inventory Control System: • is a system that ensures quantities in stock fall within an established range.

8. Average Monthly Consumption: • The average of the quantities used in either the most recent three or six months.

9. The level of stock above which inventory levels should not rise under normal conditions. The level of stock at which actions to replenish inventory should occur at normal conditions. Maximum and Minimum stock Levels

10. Level vs. Quantity • The max is set as a number of months of stock (for example, the maximum level is at twelve months of stock). • The Minimum level is also set as a number of months of stock (for example, the min is set at 3 months of stock).

11. Review period • The review period is the routine time interval between assessments of stock levels to determine if an order should be placed.

12. Safety Stock Level • is the buffer, cushion, or reserve • stock kept on hand to protect against stockouts • caused by delayed deliveries, markedly increased demand or other unexpected events.

13. Lead- time stock level • Is the level of stock used between the time new stock is ordered and when it is received and available for use.

14. Quantity on Order • Is the quantity of stock previously ordered but not yet received. • In a well-functioning logistics system, this number is zero, because you should receive previous order well before the end of the review period.

15. Emergency order point (EOP) • is the level of stock that triggers an emergency order, regardless of the timing within the review period.

16. Example • Consumption two dozen of purified water daily • Lead time of 1 month • Review period 1 month

20. As we go through options A to C • Service provided is becoming more efficient and the budget required is also increased. • Therefore the shop owner may consider ordering every 10 days and shortening the lead time 10 days

21. Same service reduced stock

22. The Standard Max- Min Inventory control system • There are two basic rules:

23. Review all stock levels at the end of each review period. For Products that are at or have fallen below the min, order enough stock to bring stock levels up to the max.

24. Second rule •  If the stock level for any item falls below the emergency order point before the end of the review period, place an emergency order.

25. Orders are placed only when both of the following conditions are met: • It is the end of the review period • The stock level is at or has fallen below the min.

26. How to calculate Maximum stock quantity – Stock on hand – Quantity on order = Order quantity Where: • Max stock quantity = Average monthly consumption x Maximum number of months of stock to be kept • Max Stock Level ≥ Min stock level + Review period stock level

27. How to fix the min and max levels, the emergency order point level and the review period. Min Stock Level = Lead time stock level + safety stock Level Where: • Lead Time stock level = the average number of months of stock used after an order is placed and before we receive the new order. • Safety Stock Level = Buffer against uncertainty + Review period stock level

28. Six month consumption at Harar ortho centre

29. Given Emergency order lead time = Three weeksAverage Lead time is one monthReview Period = Three MonthCalculate Safety stock level, Min, Max and Order quantity.

30. Safety stock level = Buffer against uncertainty + Review period stock level • Three weeks (1 month) + 3 months stock level = 4 month Therefore safety stock for • foot = 8 x 4 = 32 • Knee joint = 7 x 4 = 28 • Hand = 1 x 4 = 4

31. Min = Lead time stock level + Safety stock level1 month stock level + 4 month =5 Months stock level Therefore Min for Foot = 5 x 8 =40Knee joint = 7 x 5 = 35Hand = 1 x 5 = 5

32. Min = Lead time stock level + Safety stock level 1 month stock level + 4 month =5 Months stock level Therefore Min for • Foot = 5 x 8 =40 • Knee joint = 7 x 5 = 35 • Hand = 1 x 5 = 5

33. Max ≥ Min stock level + Review Period stock level 5 month + 3 month = 8 month stock Therefore Max for • Foot = 8 x 8 = 64 • Knee Joint = 8 x 7 = 56 • Hand = 8 x 1 = 8

34. Order Quantity = Max Quantity – ordered Quantity – Stock on hand • Foot = 64 – 0 – 18 = 46 • Knee Joint = 56 – 12 – 8 = 36 • Hand = Stock on hand is greater than Min and therefore no need to initiate order for Hand).

35. Appreciation • Consider review period 1 year?? • Consider Lead time 6 months??

36. What to do in case of budget constraints? • VEN (Vital, Essential and Non – essential), which categorizes items by their need, and / or • an ABC analysis, which categorizes products by cost.

37. Budget = CHF 7'000

38. What to do in case of new service or other factors? • Based on our target we calculate the requirements and we place order accordingly.

39. 2. Order management (follow-up) • Preparing an order When preparing order we have to identify the needs (what, how much, when, where)

40. What • Make sure the supplier understand what item we ordered. • Name vs. Description (Foot Vs. Foot, olive left 20) • Supplier code Vs. customer codes ( CRE 669 vs. OCPOKNEEKIML)

41. How much • Economic order quantity • Ordered quantity concedes with unit packaging. • Cost of the order is inline with our budget.

42. When • We have to indicate delivery time i.e. when should the item is in our warehouse (not in customs not on transport or else)

43. Where • Is the supplier is expected to deliver to the port or to our compound.

44. For each order open a file with a cover page checklist. The checklist should contain information like: • Order number • Supplier name • Items ordered (group of items) • Order date • Requested date of delivery • Reception date (Partial or Complete) etc • All correspondences concerning the order with the supplier should be filed that would help us in analyzing the lead time the service provided and so on.

45. Reception of Orders • Check whether we have received the same item, quality and quantity that we ordered. • If there are some discrepancies or quality problem or the condition is not good • make appropriate claim in time. • Or acknowledge good receipt of order to the supplier. And the file is closed.

46. 3- Store (warehouse) Management • Warehouse management concerns the warehouse building, the handling and storage of goods, and the administrative aspects.

47. Building of the store • Must be secured • Easy to clean • Protect from water penetration, direct sunlight, rodents • Have enough space to accommodate our stock

48. Layout and Arrangement in the store The minimum in store layout should comprise: • A reception location • A storage location: Shelves, Pallet, Drawers Racks • A dispatch location ( Dispatch Table, palettes)

49. Arrangement in warehouse • Fixed • Fluid • Semi Fluid

50. Ex: Storage materials