{"56549":{"#nid":"56549","#data":{"type":"news","title":"The Logistics Institute at Georgia Tech Explores Decision-Making Impact With Inventory Management Focus Group","body":[{"value":"\u003Cp\u003EATLANTA, May 22, 2002 - The Logistics Institute at Georgia Tech is pleased to announce the results of an inventory management focus group that included representatives from 14 industry-leading companies. The focus group was conducted as a part of the Logistics Management Series of courses at The Logistics Institute. The following two key issues were examined: \n\u003C\/p\u003E\n\u003Cp\u003E- Factors that influence inventory turns and fill rate in warehousing, transportation and procurement.\u003Cbr \/\u003E\n- Why demand data is less valuable as time goes by. \n\u003C\/p\u003E\n\u003Cp\u003EDr. Ed Frazelle, director of The Logistics Institute\u0027s (TLI) Logistics Management Series and president of Logistics Resources International (\u003Ca href=\u0022http:\/\/www.LRILogistics.com\u0022 title=\u0022www.LRILogistics.com\u0022\u003Ewww.LRILogistics.com\u003C\/a\u003E) facilitated the inventory management focus group. The focus group included representatives from American Italian Pasta Company, BP Fabrics and Fibers, Bush Brothers and Company, Defense National Stockpile Center, Department of Defense, Expotran, FedEx Supply Chain Services, Groenewout Consultants \u0026amp; Engineers, Milliken \u0026amp; Company, NCR Corporation, Office Depot, PPL Services, The GAP, Inc., and Vistakon\/Johnson \u0026amp; Johnson Vision Care, Inc. The focus group concluded with the following findings:\n\u003C\/p\u003E\n\u003Cp\u003E\u003Cstrong\u003EFactors that influence inventory turns and fill rate in warehousing, transportation and procurement.\u003C\/strong\u003E\u003Cbr \/\u003E\nAccording to Dr. Ed Frazelle, \u0022Increasing inventory turns and fill rate all at the same time is a process not unlike using a divining rod to find underground deposits of gold. The barriers to increased turns and fill rate are often \u0022underground\u0022 in decisions made in warehousing, transportation, and procurement by individuals not accountable for turn\/fill rate performance and not necessarily trained in the tradeoffs in logistics. When we work with our clients to assist them in increasing turns\/fill rate, we look in every area of the supply chain for the locations and excuses that lead to the thousands of little piles of inventory that add up to slow turn rates and low fill rates for key items. We asked our Logistics Focus Groups to rank the factors in warehousing, transportation, and procurement that influence inventory turns and fill rate.\u0022 \n\u003C\/p\u003E\n\u003Cp\u003EWarehouse Factors:\u003Cbr \/\u003E\n1. Inventory accuracy. Lack of trust breeds just-in-case inventory.\u003Cbr \/\u003E\n2. Number of SKUs. More SKUS means more safety stock and less attention to problem SKUs.\u003Cbr \/\u003E\n3. Number of Warehouse Locations. The amount of inventory in a logistics network is proportional to the square root of the number of stocking locations (i.e. warehouses). Fewer warehouse locations translates to less inventory, primarily safety stock. \n\u003C\/p\u003E\n\u003Cp\u003ETransportation Factors:\u003Cbr \/\u003E\n1. Mode Choice. Slower modes yield excess in-transit inventory. Less reliable modes yield higher safety stocks.\u003Cbr \/\u003E\n2. Delivery\/pick-up frequency. More frequent shipments reduces cycle stock inventory.\u003Cbr \/\u003E\n3. Routing. Favorable routes and schedules reduce in-transit stocks.\u003Cbr \/\u003E\n4. Tracking. Inventory visibility breeds trust which reduces just-in-case inventory.\u003Cbr \/\u003E\n5. Carrier choice. Reliable carriers show up on time and reduce the need for safety stock. \n\u003C\/p\u003E\n\u003Cp\u003EProcurement Factors:\u003Cbr \/\u003E\n1. Leadtime. Longer lead times mean lower forecast accuracy and excess in-transit inventory.\u003Cbr \/\u003E\n2. Quantity\/order amount. Half the purchase order quantity stays in the system. The lower the purchase order quantity, the less inventory in the system.\u003Cbr \/\u003E\n3. Purchase price. Quantity discounts are special opportunities to procure but yield higher inventory levels.\u003Cbr \/\u003E\n4. Cost of ordering. Some suppliers are more costly to do business with than others. The higher the cost of ordering, the less often we should order. The less often we order, the more we have to order each time. The more we order per order, the higher the inventory level. \n\u003C\/p\u003E\n\u003Cp\u003E\u003Cstrong\u003EWhy demand data is less valuable as time goes by.\u003C\/strong\u003E\u003Cbr \/\u003E\nAccording to Dr. Frazelle...\u0022Demand data is not like fine wine. Its value does not appreciate over time. In fact, the value of the demand data declines exponentially over time. Many people do not realize that the best predictor of tomorrow\u0027s stock price is today\u0027s stock price. Similarly, the most valuable information for forecasting future product demand is the demand data closest to the forecasting period. As time goes by changes in market conditions, competitive circumstances, macroeconomics, consumer tastes, etc. erode the value of historical demand data. There are two more analogies I like to use to explain the phenomenon. The first is from chemistry and physics. Some reactive elements have daily half-lives. The principle is that the reactive capability of the element is cut in half as each day goes by. The second analogy is from electrical signal processing. There, the strength of the signal degrades exponentially as the distance from the source and time removed from initial signal production increases. Similarly, the value of demand data declines exponentially as time goes by and as the data is removed from its original source and amalgamated\/corrupted with other demand data. In studying this phenomenon in our Logistics Focus Groups we asked the groups to rank the reasons for degradation of demand data over time.\u0022 \n\u003C\/p\u003E\n\u003Cp\u003E1. Declining Product Life Cycles\u003Cbr \/\u003E\n2. Rapidly Changing Consumer Preferences\u003Cbr \/\u003E\n3. New Global and E-Competitors\u003Cbr \/\u003E\n4. Data Accuracy Degradation\u003Cbr \/\u003E\n5. Employee Turnover\u003Cbr \/\u003E\n6. Customer Base Turnover\u003Cbr \/\u003E\n7. Mergers and Acquisitions\u003Cbr \/\u003E\n8. Product Obsolescence Rates\u003Cbr \/\u003E\n9. History\/Influence of Promotions\u003Cbr \/\u003E\n10. Changing Demographics\u003Cbr \/\u003E\n11. Government Regulations\u003Cbr \/\u003E\n12. Economic Environment\u003Cbr \/\u003E\n13. Product Diversification\u003Cbr \/\u003E\n14. Changes in Management Perspective and Priorities \n\u003C\/p\u003E\n\u003Cp\u003ETLI\u0027s focus groups are conducted as a part of its professional education programs, each addressing key issues in supply chain strategy, inventory management, transportation management, world-class warehousing, and third-party logistics. \n\u003C\/p\u003E\n\u003Cp\u003E\u003Cstrong\u003E About The Logistics Institute\u003C\/strong\u003E\u003Cbr \/\u003E\nThe Logistics Institute (TLI) was established in 1992 to coordinate all logistics-related activities on Georgia Tech\u0027s campus. TLI\u0027s Leaders in Logistics is comprised of more than 20 corporations and government agencies that partner with the Institute to fund research and educational programs. Through this partnership TLI focuses on logistics research, education, and practice, with an emphasis on supply chain design, transportation planning, and e-commerce logistics.\n\u003C\/p\u003E\n\u003Cp\u003EMEDIA CONTACTS\u003Cbr \/\u003E\nTammy Artosky\u003Cbr \/\u003E\nLMS Program Director\u003Cbr \/\u003E\nThe Logistics Institute at Georgia Tech\u003Cbr \/\u003E\n\u003Ca href=\u0022mailto:tammy.artosky@isye.gatech.edu\u0022\u003Etammy.artosky@isye.gatech.edu\u003C\/a\u003E\u003Cbr \/\u003E\n404-894-1713 \n\u003C\/p\u003E\n\u003Cp\u003EYolanda Wilson\u003Cbr \/\u003E\nPR Specialist\u003Cbr \/\u003E\nGeorgia Tech Continuing Education\u003Cbr \/\u003E\n\u003Ca href=\u0022mailto:yolanda.wilson@conted.gatech.edu\u0022\u003Eyolanda.wilson@conted.gatech.edu\u003C\/a\u003E\u003Cbr \/\u003E\n404-385-3547\u003C\/p\u003E","summary":null,"format":"limited_html"}],"field_subtitle":"","field_summary":"","field_summary_sentence":"","uid":"27279","created_gmt":"2002-05-22 00:00:00","changed_gmt":"2016-10-08 03:06:15","author":"Barbara Christopher","boilerplate_text":"","field_publication":"","field_article_url":"","dateline":{"date":"2002-05-22T00:00:00-04:00","iso_date":"2002-05-22T00:00:00-04:00","tz":"America\/New_York"},"extras":[],"groups":[{"id":"56347","name":"EMIL"}],"categories":[{"id":"145","name":"Engineering"},{"id":"135","name":"Research"}],"keywords":[],"core_research_areas":[],"news_room_topics":[],"event_categories":[],"invited_audience":[],"affiliations":[],"classification":[],"areas_of_expertise":[],"news_and_recent_appearances":[],"phone":[],"contact":[{"value":"\u003Cstrong\u003EBarbara Christopher\u003C\/strong\u003E\u003Cbr \/\u003EIndustrial and Systems Engineering\u003Cbr \/\u003E\u003Ca href=\u0022http:\/\/www.gatech.edu\/contact\/index.html?id=bt3\u0022\u003EContact Barbara Christopher\u003C\/a\u003E\u003Cbr \/\u003E\u003Cstrong\u003E404.385.3102\u003C\/strong\u003E","format":"limited_html"}],"email":["bchristopher@isye.gatech.edu"],"slides":[],"orientation":[],"userdata":""}}}