8 Ways To Reduce Cost - Industrail Inventory Management

8 Ways To Reduce Cost

Automated Vendor Managed Inventory

John P. AielloDirector of Business DevelopmentEF Bailey CompanyDate:

…..With…..

What is Automated Vendor Managed Inventory and AutoCrib Industrial Vending Systems ?

A point-of-use industrial vending system, that gives you 24/7 secure access to your indirect manufacturing, processing, MRO and PPE items.

A way to have your industrial supply distributor save you money by managing your indirect inventory

Reduce Acquisition Costs! Reduce Receiving Costs Reduce Carrying Costs Reduce Purchasing Costs Reduce A/P Costs

Eliminate Obsolete Inventory

What’s Your Real Cost ?

1 Reduce Consumption – Stop Waste, Fraud, Theft and Abuse

• 24/7 Controlled Access• Accountability – Track usage by department, workcell, job,

employee• Point-of –use “pull” system dispensed in the correct

package quantity

2 Reduce Inventory Carrying Costs

• Promotes supplier-consigned inventory - 80% of automated dispensing machines have consigned inventory from the supplier.

• Move to demand-based ordering. Case studies show that demand-based ordering with a point-of-use dispensing system allows on average about 20% less inventory on hand than standard min/max based purchasing

Demand-Based Inventory Management Software allows most users to cut inventory up to 20%

3 Cut Spend on New Tools – Force use of Reconditioned Items

• Issue reconditioned items first, before allowing access to new items

4 Reduce Obsolete Inventory• Increased visibility of slow and dead inventory• With AVMI contract – your Industrial supply vendor can

more easily dispose of unused inventory• Dispense older inventory first• AutoCrib software tracks RATE of use over time for each

item, so it will not automatically reorder slow-moving items until they are needed

Most shops see obsolescence reduced by 50% after implementing industrial vending

5 Reduce and Eliminate Stock-Outs

• Cut Spend on unnecessary overnight shipments• Cut spend on carrying duplicate tools and

supplies

6 Remove Traditional Tool Cribs and Tool Rooms entirely – at the same time making tools and supplies available 24/7 at the point-of-use

• Reassign tool crib attendants to more productive work• Tools / Supplies available 24/7 while maintaining security• Support increased production without adding to

headcount

7 Reduce or Eliminate Purchase Orders• Items can be automatically reordered

when they fall below preset levels• Consolidated monthly invoicing with

AVMI• Substantially reduced paperwork for

purchasing department

Average time/personnel cost of a purchase order is $150

8 Reduce Support Staff Costs

• Real time inventory management visibility eliminates time spent doing cycle counts, managing min/max inventory levels

• With AVMI, receiving, accounting and inventory control staff costs can be reduced and staff reassigned since the supplier can absorb these responsibilities

Trips to Tool Crib / Looking for Tools & Supplies / Retrieving ItemsT = Average time looking for and retrieving item (15 minutes is the US average)E = Current # of shop employeesS = Current # of shiftsP = Average # of trips per day per employeeR = Average shop rate per hour

$ Cost Savings (Item Retrieval) = ((T-4)/60) x E x S x P x R

EXAMPLE: 10 shop employees per shift, operating 2 shifts per day. Each employee making an average of 2 trips per day at 15 minutes each to retrieve tools. Average shop rate of $60/hr.

$440 / Day Cost Savings = ((15 – 4) / 60) x 10 x 2 x 2 x $60

Calculate Your Cost Savings ….

Stock Out Reduction

S = Number of Stock Outs per weekU = Average Cost of UPS Red ($19.50) or your cost of a stock out

$ Cost Savings (Stock Out) = S x U x 4.25

EXAMPLE: 2 Stock Outs per week, UPS Red $19.50

$165.75 / Month Cost Savings = 2 x 19.50 x 4.25

Calculate Your Cost Savings ….

Reduction of Obsolete Inventory

V = Current Inventory ValueR = Obsolete Inventory (Industry average is 4% per year)

$ Cost Savings (Reduction of Obsolete Inventory) = V x R /100

EXAMPLE: $500,000 in indirect inventory, 4 % of inventory obsolete per year

$20,000 / Year Cost Savings = 500,000 x 4 / 100

Calculate Your Cost Savings ….

Thank You for attending our webinar !

To save your spot on our next Webinar:

“10 Ways to Improve Productivity”Please email or call:

John AielloDirector of Business DevelopmentEF Bailey Company206.518.2327jaiello@efbailey.comwww.efbailey.com