Inventory management Flashcards
4.1.1 Identify the advantages with just-in-time inventory. (p. 346)
- JIT - Pars arrive “Just in time”
- Keep minimal inventory in stock
- Allows for lower capital be be invested
- Savings from JIT are realized in areas such as carrying costs, ordering costs and other investment opportunities
4.1.2 Define ABC classification (p. 347)
Sorts items based on anticipated use and dollar value - ABC classification sorts items based on the anticipated use and dollar value.
“A” category items 30% of inventory represent the most expensive items. Stocking these items represents a substantial expense to the organization.
- As an example, many small to mid-sized fleets would not stock engines and transmissions because of their high per unit cost.
B classification represent 20% to 30% of the items a parts operation would stock. Typically items stocked in this category might be batteries,
brake rotors and alternators.
“C” category represent the remainder of the items to be held in inventory. These items usually tally up to be less than one quarter of the inventory in terms of dollars. Typically “C” type items are those which might be ordered to cover several months’ worth of stock. Paper products, window cleaner, and key blanks are items that maybe represented by the “C” category.
4.1.3 When is it appropriate to use the EOQ = Economic Order Quantity Method? (p. 347)
is to find a financial balance between the lowest ordering cost of buying in bulk and the carrying costs if they sit on the shelf.
4.1.4 Define carrying costs? (p. 347)
Personnel, insurance on inventory held, the cost of ware- housing, taxes, interest on the inventory if it is financed, if the inventory is not financed there is an opportunity cost for investment, the cost of utilities, depreciation of items such as racks and bins and material handling equipment.
4.1.6 Understand the differences with FIFO, LIFO and moving averages. (p.348)
• Last In, First Out (LIFO) - meaning the most recent price paid for this item would be the
price charged against the work order.
• First In, First Out – (FIFO) meaning the price of the oldest part in stock is the price
charged against the work order.
• Moving Average – meaning the average price of those items held as stock is charged.
As an example, three oil filters purchased at different times for
different prices would be totaled and divided by three to arrive at a price for the filter.
Each time a filter is replaced the average price changes as does the cost for the filter
charged to the work order.
4.1.7 Determine how to benchmark inventory. (p. 355)
Turnover indicates the dollar amount of sales or usage generated by each $1 of assets.
Calculate this by dividing the inventory parts sold (i.e. not agency or company non-stock parts) by the value of the inventory.
This statistic should be a minimum of 3-4 for a fleet organization.
IQR Inventory Quality Ratio
Analyticalally technique for measuring inventory performance.: Includes overstock, slow moving , not moving
JIT
Intended to keep minimal inventory in stock - Allows for smaller amounts of capital to be invested Realized in carrying and ordering costs - Intent is that parts arrive just when they are needed
Outsourcing Parts Pro’s and Cons
Pros: Increased productivity - Inventory elimination - Cost Saving.
Cons: Provit vs. Customer Service - what to do with Current Inventory - Customization lost because they cater to the “many”
Tips for Inventory Management
Focus on PM Needs - Do not stock readily available parts - Select few vendors but based on quality and reliability - Frequently used parts should be available 90% - Inventory turns greater than for - Have parts before service
Maintenance Outsourcing
Pros: - Consistent price - Large geographical area - Stand procedures - Certified Techs - Authorization - Flexible payment — CONS: Profit motivated - limited Scope - Premature replacement
Outsourcing Partner Selection
Small Fleet - local Garage /
Large Fleet - FMC *use National shops / tailor programs per fleet / resources to identify challenges and provide solutions / policy / vehicle selection assistance / flexibility for repairs no matter how completed / tech for reports / buying power for parts & services / Emergency preparedness assistance
How do Determine what should be outsourced
Factors include Skill level of your inhouse techs - parts on hand - total cost of service - hours of operation - frequencey of Repairs
Service Level Agreements
Should be developed with goals , objectives, and expectations - Meaningful - Fair - Achievable - Measurable - Baselines and target results must be established
Program Audit
Goodwill adjustments - made by manufatures after the expiration of a warranty) * size of fleet / issue / miles traveled that would have been covered / shop / maintenance records* - Second opinions ( are they always replacing a specific part?) - In/out of Network repairs - Multiple Invoices - ananlyze for warranty repairs - Ask for return of all parts - Audit warranties on parts - 3 strike Rule
