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CPE Inventory Optimization Project

NOVEMBER 13, 2008

NOMBRE MATRICULA SEDE

Marco Antonio Silva A01048110 CD. JUAREZ

Javier Snchez Flores A00266037 SALTILLO

Miguel Casillas Velasco A00343715 COLIMA

Carlos Sergio Arrieta Serrato A00343714 COLIMA

INGENIERA DE LAPRODUCTIVIDAD

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Inventory Optimization Report

Points of Discussion

Definition of the Problem

Root Causes

Current Process Map

Improvement Opportunities

Suggestions for opportunities found

Financial Benefits



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1.Problem Definition

Shipping costs in May increased $61k due toexcessive overnight shipments of CPE

Stock requirement analysis is manual, timeconsuming, and cumbersome

Suspect we may retain excessive stock in some

products (See Annex # 2 for Details)



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2.Root Causes

Shipping costs in May increased $61k due to excessive overnightshipments of CPE Stock-out due to:

> Delay in approving PO

> Delay from Vendor in getting the PO in their system

> Delay in normal vendor shipping time frame

Re-Stocking analysis is manual, time consuming, and cumbersome Systems provide pieces of data that must be manually manipulated in

Excel to obtain:

> Field shipment orders

> Stock replenishment quantity

Suspect we may retain excessive stock Lack of generally accepted stocking methodology to manage stock



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3.Improvement Opportunit ies

Less Regimented PO approval process

Automatic re-stocking analysis

Utilize bar code scanners to integrate withinventory system

Decrease supplier lead time



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4.Improvement Actions

Develop fully automated daily report to provide re-stock amounts and field shippingdetails. Field Shipping detail:

> Order #> CLLI> TSP Date> Market> Equipment

Re-Stock Amounts> Part Number> Quantity

. Develop process to incorporate scanning devices to place inventory data into inventory

system.

Enhance CPE approval process. Provide Harold with unilateral authority to replenish stock to system-driven stock level Generate daily/weekly reports to advise executive management of capital commitment Special capital purchase circumstances, such as TitleMax, will be handled ICB

Pursue new vendor supply strategy to reduce lead time to delivery. Vendor retain 2 months of stock on hand Commit to next day shipping Will probably have to guarantee payment for on hand stocked items



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5.Mathematical Implementation Model



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6.1 Financial Benefits 1 Day



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6.2 Financial Benefits 5 Days



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7. Summary Enhance PO approval process

Immediate one-time savings of $233,703

Automate Field distribution reporting Eliminate manual labor increasing accuracy

Automate the re-stock analysis system Immediate one-time savings of $326,180~ (Annex 1) Optimizes stock levels Minimizes capital commitment

Potentially decrease supplier lead time Additional potential savings of $ 468,994

We experienced that we were able to implement more than 1 alternative. (1. ReplenishmentSystem, 2. Reduced Supplier Lead Time by giving them POs 6 weeks in advance in order to getweekly shipments, 3. Eliminated PO approval process.

The only alternative we left open was the scanning devices that Javier will continue to develop forthe next few months.

Nuvox personal was very appreciated about the job completed in very short period of time andnow they feel comfortable with the results given.

We noticed that is better sometimes to get an opinion from outside in order to have a betterperspective of the whole system.



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8. Bibliography

Libro de Texto: KEEPING SCORE: Using the Right Metrics to Drive W orld-Class Performance

Autores: Mark Graham Brown

Editorial: Productivity Press

Ao: 2006

ISBN: 978-1-56327-355-1 (ProductivityPress, Paperback )

Libro de Texto: LEAN THINKING : Banish Waste and Create Wealth in Your Corporation

Autores: James P. Womak and Daniel T. Jones

Editorial: Simon & Schuster

Ao: 2003, 2nd edition

ISBN: ISBN 978-0-7432-4927-0

Lean Six Sigma : Combining Six Sigma Quality with Lean Production Speed

by Michael L. George McGraw-Hill; 1 edition (April 25, 2002)



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Annex # 1


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