“Best Practices” - Branch Ops

1. “Best Practices” - Branch Ops

2. Sx.e AIM Grant Howard Grant W. Howard Company 2

3. Grant Howard: • Expert on Inventory Management, System Utilization and “Getting Results” • Works with Multiple Distributors, Associations and Software Houses • Conceptual Designer Behind Sx.e’s AIM • Sits on Multiple Board of Directors • Founder of Grant W. Howard Company 3

4. Our Discussion Today • Company Objectives • Inventory Management Objectives • Inventory Management Model • Branch/Ops Involvement • Branch/Ops Tools 4

5. Company Objectives Profitability Growth Longevity Bottom Line Profits(P&L) GM and Oper. Efficiency Asset Management Customer Service & Retention Maintain the base Employee Happiness 5

6. Customer Service Availability (Fill Rates) Proper Backorder Handling On Time Delivery Accuracy: Item, Quantity, Price Profitability (ROI) GM Improvement (Sales and Cost) Freight Considerations - OC Analysis Efficiency & Asset Mgt: CtoC and CtoP Surplus Inventory & Safety Inventory Turns/Days supply, ROI/T&E/GMROI IM Objectives Watch the C to C (Warehousing, Handling, Obsol. & Shrink, Taxes, Ins, Interest) Watch the C to P (Purchasing/Replenishment, Receiving & Put-away, A/P) 6

7. Service - Fill Rates • How well a business meets its customer’s needs - pulse of customer’s happiness/loyalty. • What to Measure: Fill Rates = Shipped/Ordered Quantity: 9 out of 10 = 90% Line Item SC: 9 out of 10 = 0% Order Ship Complete? • What Should Fill Rates Be? • The Report is Broken - Look at “First Pass” Orders - EDI, Fax, Internet, etc for true fill rates and backorder retention • Only one way to better Fill Rates - The Right Inventory. Two ways to the Right Inventory... 7

8. Service Level • High Service Level: • Maintain/gain customers • Less B/O’s paper float - Save $ • Low Service Level: • Lost $ • Lost customers 8

9. Inventory Profits • Low Turns/GMROI/T&E • Kills the bottom line -Cost to carry • Some inventory $ not working - steals from products really needed- Service Level Suffering • High Turns/GMROI/T&E • Cost of Purchasing • Service level may be suffering 9

10. The Replenishment Model A Good Replenishment Model addresses the two objectives of Customer Service and Profitability When to Replenish? What to Replenish and How much? What is not needed? 10

11. What is not Needed? What to Replenish and How Much? EOQ When to Replenish? Order Cycle Surplus Point PNA/Level Line Point or Max/EOQ Lead Time Order Point or Min When, What, How Much? What is not Needed? Safety When, What, How Much 11

12. Who’s Involved? 12

13. Sales/Transfer History Lost Sales Exceptional Sales Human input Demand/Usage Lost Sales: Ask what they want Canceled B/O’s Directs to fill in Substitutes Ship from another whse Three Methods to Enter: 1. While in Sales/Order Entry 2. Lost Sales open order 3. Sheet, then to LS open order What about the fill rate report? Demand/Usage 13

14. Lost & Exceptional SalesCritical for Good Demand 14

15. Lost Sales/Exceptional Sale 15

16. How it All Works“Product Stock Level/PNA” Level/PNA = On Hand less Committed plus Incoming • On-hand accuracy everyday: • Systems &Tools, Processes & Procedures, Education & Understanding • Good Suggested/Cycle Count Program • Make the adjustments when you find them • Accurate committed and incoming everyday: • Paperfloat and Paperflow - Open Transaction Summary Report • Dates and Quantities • Watch the consignment warehouses • Use “Alternate Inventory” Buckets • DWIADT and DIRTFT • WMS 16

17. Paperfloat Control 17

18. CONTINUOUS Prevention Identification Disposition Goals/Plan Responsibility Coordination Surplus Inventory 18

19. Surplus Inventory Disposition BOP/GAP - Put of the fire: Short or Long Term BLP/Sugg Xfers - Use it where you can: Long Term Teach branches to use LT first. Don’t borrow stock and put branch in “need”. 1. Stock Balance: (“X” Months Supply) - With “To” branch approval/Before Buy 2. Sell Above Cost: Customer, Other Distributor 3. At Cost: Sell at cost, Return at cost with no charges (freight, restock) 4. Below Cost: Sell below cost, Return below cost and/or with charges 5. Sell Above “Write-off” Cost: Garage/Fire Sale, Flea Market, Auction House, Liquidation House 6. Dump at “Write-off” Cost: Donate, Scrap, Dump 19

20. We have to have Branch, Operations and Sales Understanding, Buy-in and Help - TEAM: • Usage/Demand: Sales, Transfers, Lost Sales, Exceptional Sales, Manual/Automated overrides • Lead Time: P/Os, Transfers, Manual overrides • Purchasing Net Available: On-hand and open docs – Orders, Transfers, P/Os, Workorders • Stock List and Excess Prevention/Disposition 20

21. Getting Results 21

22. Procure: IM and Control Operations Sales Marketing Systems and Tech Sell: Sales Marketing IM and Control Operations Systems and Tech B2B Warehouse: • Operations • IM and Control • Systems and Tech • Sales • Marketing Seems to be a Pattern? Where does Management fit into all of this? 22

23. Back to Basics Many distributors DON’T: • Set the system up properly • Feed the system good data • Understand or Use the system properly • Clean up bad processes and procedures • Educate their people on the system or processes • Help departments work together • Help work towards common goals Yet they think it will all just magically work 23

24. The Foundation Plan of Improvement Back to Basics Proactive versus Reactive Replace Inventory With Information 24

25. Branch Priorities • Sell • Service the Customer, Proper Backorder Handling, OTD and Accuracy of Shipments/Billing • Lost/Exceptional Sales and Demand/Usage Changes • Keep the Level Accurate (On-hands and PaperFloat) • Eyes and Ears  Communication Demand/Usage Speaker/Listener Lead-time Who is Listener? Stock Level Status, Frozen Items, Tmins, and Paths • Prevention and Disposition of Excess Inventory 25

26. The Tools Branch Management Tools - Toolkit: • Open Transaction Summary and CC Monitor (daily) - Keeping the stock level accurate • Lost Sales/Exceptional Sales (Daily and Monthly) - Keeping demand accurate • Customer Service Action (daily) - Providing outstanding service, getting backorders in and out tothe customer - Closed Loop Thinking • Suppressed with Activity, (Monthly and Daily) -Stocking the right inventory • Top 25 Surplus (weekly) - Reducing surplus and improving profitability AND SERVICE 26

27. J D I It’s too hard to log lost and exceptional sales It’s too hard to keep the paper work clean It’s too hard to keep the on-hand correct It’s too hard to work excess inventory It’s too hard ... If…, It’s too hard..., The system is broken or doesn’t have it…, We will never get them to do that…, We don’t know how to do that… J D I ! 27

28. 12 Months to Better Service and Profits Execution Is the Key - One Action Each Month 1. Good Usage: Lost/Exceptional Sales, Usage Roll-up, Seasonal Trending, DP 2. Implement Customer Buying Habits/Average Ship Quantities 3. Stock Level Accuracy: On Hand Integrity and Paperfloat Control 4. Buyer’s Control Center: Replenish at OP Priority, Targets, EB vs LB, One-stop 5. Order Cycle Analysis and Proper use of EOQ - Understand and Use Properly 6. Timeline Analysis: “Too Late” and “Too Early” 7. “Smart” Inventory Reduction Program, including Excess Prevention and Disposition 8. Inventory Stocking Policy and “Product Add” Procedure 9. Controlled Replenishment: Centralized Replenishment and Maintenance 10. Backorder Policy and Flawless Backorder Handling System 11. Data and Parameters: Smart Parameters (Depth, Cost and Hits/Rank Balance), Smart Exception Reports and Proactive Maintenance 12. Measure and Improve and Don’t Measure Just to Measure 28

29. Spend your days reacting to the fires... you may be efficient, but will you be effective? Fire Prevention ... 29

30. www.gwhco.org Grant Howard: ghoward@gwhco.org 734-428-0529 Phone 734-428-0593 Fax John Cason: jcason@gwhco.org 256-830-0676 Phone 256-830-0481 Fax Our approach involves tailoring the best practices in distribution to the specific needs of our clients. Our working philosophy revolves around building a strong and self-maintaining infrastructure by developing a working plan based on processes and procedures, education and understanding, implementation of tools and technology; and through communication, organizational structure and team environments. GWHCO 30

31. Q & A

32. Thank You!