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Inventory Management
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ELA Certification for Logistics Professionals
Performance Criteria (Standards – 2nd Layer)
2 Supervisory/Operational Management Level (EJLog)
2.2 Inventory Management
European Logistics Association
Standards – 2nd Layer Version 110101
© European Certification Board for Logistics 2011 1 Inventory Management
2.2.1 Classify items by demand characteristics
• Understand the importance of classifying items by demand characteristics
• Select demand categories according to turnover, quantities ordered, order frequency, demand variability, strategic importance, cost per item, ordering costs, procurement lead times
• Identify average demand parameters
• Measure demand parameters on a continuous basis, re-classifying items when appropriate
• Measure demand variability over the years, seasons, months, weeks, days of week, or other events.
• Monitor quality performance for demand classification
• Implement performance and quality improvements in demand classification
2.2.2 Identify major segments of inventory using ABC analysis
• Understand the importance of classifying items using ABC analysis
• Apply ABC analysis to classify items and understand when it is not appropriate to classify items using ABC analysis
• Select inventory management categories A, B, C, D… according to turnover, quantities ordered, order frequency, and throughput variability
• Measure inventory management parameters on a continuous basis, re-classifying items when appropriate
• Monitor quality performance for inventory management classification
• Implement performance and quality improvements in inventory management classification
2.2.3 Forecast demand using appropriate techniques for demand characteristics
• Assess past demand patterns and forecast reliability.
• Forecast demand using world class forecasting tools and software.
• Monitor forecast error
• Implement performance and quality improvements in demand forecast
2.2.4 Set safety stock levels and stock trigger points and determine order quantities
• Establish for each item turnover, quantities ordered (downstream), order frequency, demand variability, strategic importance, cost per item, ordering costs, procurement lead times
• Define stock management principles such as periodic or level-triggered procurement, based on weighted parameters
• Establish safety stock levels and stock trigger points for each item and possibly for different circumstances, based on principles above
Standards – 2nd Layer Version 110101
© European Certification Board for Logistics 2011 2 Inventory Management
• Establish ordering quantities for each item and possibly for different circumstances, based on principles above
2.2.5 Audit stock levels and identify improvement opportunities
• Understand the importance of measuring stock levels
• Select key performance indicators for stock levels
• Measure actual performance against performance standards taking appropriate action where necessary
• Plan for performance improvements in stock levels
• Review performance for stock levels after improvements
• Monitor quality performance for stock levels
• Implement performance and quality improvement in stock levels management
2.2.6 Manage the use of IT support for inventory activities
• Understand the importance of IT support in inventory management
• Select key performance indicators for IT support for inventory management
• Measure actual performance against performance standards taking appropriate action where necessary
• Plan for performance improvements in IT support in inventory management
• Review performance of IT support in inventory management after improvements
• Monitor quality performance in IT support in inventory management
• Implement performance and quality improvement in IT support in inventory management
• Use IT support for inventory activities
2.2.7 Utilise different inventory management systems
• Establish for each item links and dependencies in procurement (kitting, economic order grouping, bills of materials, MRP, MRP2…)
• Link inventory management policy with ERP or central planning procedures
2.2.8 Update, analyse, verify and reconcile inventory records
• Understand the importance of inventory reporting
• Select key performance indicators in inventory reporting
• Analyse data quality in inventory reporting taking appropriate action where necessary
• Plan for performance improvements in inventory reporting
• Review performance of inventory reporting after improvements
• Monitor quality performance in inventory reporting
Standards – 2nd Layer Version 110101
© European Certification Board for Logistics 2011 3 Inventory Management
• Implement performance and quality improvement in inventory reporting
2.2.9 Monitor inventory performance using appropriate measures
• Understand the importance of inventory performance monitoring
• Select key performance indicators in inventory performance monitoring
• Analyse inventory performance taking appropriate action where necessary
• Plan for performance improvements in inventory
• Review performance of inventory after improvements
• Monitor inventory performance
2.2.10 Contribute to the provision of inventory resources
• Understand the importance of inventory resources
• Contribute to the selection of key performance indicators in inventory resources monitoring
• Contribute to the definition of necessary resources
• Contribute to budgeting the necessary resources
• Contribute to the selection of the necessary resources
2.2.11 Contribute to the performance and quality control of inventory operations
• Understand the importance of monitoring performance and quality in inventory operations
• Contribute to the selection of key performance indicators in inventory operations
• Contribute to the definition of performance and quality standards in inventory operations
• Contribute to the selection of the necessary resources to monitor inventory operations
• Contribute to the monitoring of inventory operations
2.2.12 Contribute to development of plans and procedures for reverse logistics
• Understand the impact of reverse logistics on inventory management
• Contribute to quantifying cost information data regarding reverse logistics in inventory management
• Contribute to negotiating with partners in the supply chain to achieve optimum resource utilisation in reverse logistics e.g. manufacturing, marketing, purchasing, engineering etc.
•
Standards – 2nd Layer Version 110101
© European Certification Board for Logistics 2011 4 Inventory Management
2.2.13 Contribute to the development and use of inventory management processes and procedures
• Understand the impact of inventory management
• Identify best practices in inventory management
• Contribute to defining inventory management processes and procedures
• Contribute to defining performance indicators, financial and non-financial
• Contribute to optimisation, documentation and communication of processes on a continuous basis