One approach is to look at supply versus demand into the future. If supply
(inventory + shop orders) exceeds sales order demand + forecasted demand to
a given horizon (6, 9 12, 15 months) then the item warrants further
investigation. Technically the trick is to drive top level demand down to
the lowest purchased component and identifying those components with no
[mailto:bpcs-l-bounces+lwl=ix.netcom.com@xxxxxxxxxxxx] On Behalf Of Al Mac
Sent: Friday, February 29, 2008 1:16 AM
To: BPCS ERP Discussion List
Subject: [BPCS-L] Unsafety $ Stock
My boss asked me for alternative solution choices, so I am asking how other
companies on BPCS cope, in case there's an idea I have not thought of, or
which has fallen out of my brain.
Situation: We're on 405 CD, off OSG, on AS/400 V5R1.
We repetitively make-to-order for Original Equipment Manufacturers.
There's a lot of model churning ... new models being added, old models
falling off schedule ... for many customers we are doing same approx $
volume business as years ago, just that the parts are not identical
Customer lead time = 2 weeks typically
Vendor lead time = 6-12 weeks
Some customers want us to keep 3-6 months raw materials on hand due to
We setup various systems to order safety stock to cover expected future
Problem: As customer business evolves, we don't notice, until auditors
question mega bucks tied up in safety stock for long gone customer
business, then it can be very time consuming to research each
scenario. Last year, we wrote off 6% of the value of our inventory due to
KISS = an unofficial mandate.
Any solution must be simple to comprehend by
* the people who approve it;
* the people who implement it; and
* the people who audit that it is working.
I have proposed in the past:
* replace fixed safety stock with seasonal safety;
* use MRP100 forecast and quarterly share the info with customers, asking
them to identify items they will no longer reimburse us for (when they
reach end of life cycle need some part from us)
* me write a "Business Evaporation Detector" program to list items where
current orders volume do not match historical average sales in last year,
to project impact on $ tied up in safety stock, by customer item, page
break totalled by customer
* I am now working on an "Only child detector" to list raw materials whose
need will be dramatically impacted by engineering revision changes (up or
So, are there any better ideas than what I already know?
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