Published on September 22, 2014
Inventory Management Decentralisation Vs Centralisation Alexander Gelis, Director, Spares and Technical Services, MacGregor Service Part of Cargotec Corporation
Services MacGregor Products Container lashing RoRo Cranes Offshore load handling Marine selfunloaders Land and port systems Hatch covers
MacGregor Service MacGregor is the world’s leading brand of engineering solutions and services for handling marine cargoes and offshore loads. MacGregor products serve the maritime transportation, offshore and naval logistics markets, in ports and terminals as well as on board ships. Our customers compare to traditional manufacturing customers are moving targets. MacGregor has a network of service stations in almost every major port or hub. MacGregor has tripled the amount of equipment delivered between 2008- 2012 compare to the 20 year period prior to 2008. The increased installed based combined with the different equipment types put pressure on the central services organisation, in order to ”optimize” the inventory to match the customers needs. 13 February 2013 3
MacGregor Logistics The key to any succesful logistics and warehouse set up is focus and targeted key performance indicators. Trends, installed base, life cycle calculations, forecasts are important elements, however focus in the right KPIs is the key. Inventory Management needs to be a separated from accounting (inventive), from sales (push effect), from sourcing and focus on using all the above elements to define a stocking policy that matches the companies accepted service rate to the customer Should material X always be on stock or can the material delivered in 3 days and still be acceptable by the customer. Availability problems combined with high write offs are a good indication for companies, that need to focus in inventory management. Many companies focus mainly on the current sales, rather than the installed base, life cycle of the equipment
Centralization vs. decentralization of warehouses for MacGregor The key benefits that we have identified with centralisation: Less inventory costs Less warehouse costs Less obsoloscence costs Optimized inventory management >> Bundling of skills High degree of automation/standardization leds to higher efficiency Less inbound transport costs Key benefits Decentralization Increased local availability Customer desire for self-pick can be fulfilled Less outbound transport costs
Why centralized warehouses in MacGregor? Number of SKU’s and transactions do not justify various smaller, inefficient local warehouses Centralized warehouses are located at logistic hot spots and meet customers requirement of lead time Inventory expertise is missing for local warehouses and due to small operation too cost intensive to build up. Increased availability of high frequent materials can absorb sporadic high demands in different ports in range of centralized warehouse Close to main airports
5. Europe + Asia Distribution Centre Infrastructure Past Logistics Network
ADC LCE Hamburg USDC Infrastructure Today's Logistics Network
Servigisitcs spare parts planning tool supports to classify parts in accordance to Marine Stocking Policy CF CM CR BF BM BR AF AM AR F M R A B C A = High Consumption Value > 80% B = Medium Consumption Value >15% C = Low Consumption Value > 5% F = High Frequent material > 80% M = Medium Frequent material > 15% R = Low Frequent material > 5% An example of ABC/FMR Analysis
Classification Overview CR CM CF BR BM BF AR AM AF F M R A B C Standard Materials Low Cost Materials High Cost Materials Other – Dying, New, etc
Classification as Purchase criteria AFAMARBRCRBMBFCFCMBig obsolete riskAvoid to stock or reduce safety stockOn stock withcareful follow upOn stock withhigher safety stockCan be stockedbut contains obsolete riskFrequency Volume HighLow HighLow
Benchmarks to improve Inventory management and increase efficiency Main Benchmarks Stock Turn Stock out measurement >> Material availability “Risk of lost Sales” Derived Benchmarks Average stock value Inventory consumption Interest Charge for inventory Storage Fee
98,0 98,2 98,4 98,6 98,8 99,0 99,2 99,4 99,6 99,8 100,0 January February March April May June July August September October November December Material Availability Risk of Lost Sales [%] - illustrative Risk of Lost Sales 11 [%] Risk of Lost Sales 12 [%] Risk of Lost Sales 13 [%]
Facts, 2009 compare to 2012 Average stock value reduced by 25% from 2009 to 2012 Total Stock Consumption increased by 20,5% from 2009 to 2012 Average stock turn increased by 35% Storage fee decreased by 14% Interest charged (internal) decreased by 60% of the total interest. Number of picked orders increased from 23% 13 February 2013 15
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