Inventory Turnover is the number of times your inventory cycles or turns over in a year. Inventory turnover can help an organization understand how efficiently their inventory is supporting sales. The inventory turnover number implies how often inventory was bought and sold throughout the year. Low inventory turnover numbers often hint at overstocking, obsolescence or unstable processes. A high inventory turnover can also be dangerous if it is depleting reserves to quickly.
How to calculate:
Inventory turnover is calculated by dividing the cost of goods sold by the average amount of inventory.
Red tags are a visual tool that is used during the sorting phase of a 5S initiative. In the sorting phase of 5S, items are either gotten rid of, kept or placed in a red tag auction area. The red tag is used for items that are either gotten rid of or placed in auction. Please note we suggest if a clear decision has been made to "get rid" of the item, just get rid of it.
General process of red tagging items:
Best Practices are a technique used in benchmarking. The technique measures similar items, activities or services and is used as a measurement or performance standard. Defining best practices is often used in continuous improvement to set new standards or improve on current practices.
Hard Savings are the tangible and identifiable savings as opposed to that realized from not spending. If we look at hard savings from a project perspective it can be defined as those savings that allow the organization, team or department to do "more" or the "same" amount of work with the same or less resource use.
Examples of Hard Savings:
Question: What is one other type of hard savings that you can think of? Have you ever had to document hard savings?
**Place answers in the comments tab.**
Soft savings are the intangible benefits that result from projects or initiatives. Soft savings are much harder to quantify than hard savings.
Examples of soft savings:
Soft savings can often be made harder. While the savings are hard to quantify soft savings can often add up and if all the dots are connected correctly and your audience can understand, they sometimes can be as valuable as hard savings.
A baseline refers to a measurement that establishes a basis for other future state measures. The baseline is usually the initial set of measurements, observations or data collected which is used for a comparison or a benchmark for improvements. It is sometimes referred to as as a current state.
Susan needed to be able to type 90 words per minute to qualify for the job she wanted. In order for her to see where she was at currently her husband established a baseline measurement by having her type as many words as she could in one minute. Susans average score was 94 words per minute.
Tim was tasked with improving the cycle time of the shops ID and Pack process. His goal was to improve the time by 2 minutes which would make the new cycle time 3 minutes from the baseline.
A supplier is any party that provides or supplies goods or services. Suppliers can be both internal, meaning that the supplier is upstream of your process step or external like in the case of a contractor, subcontractor or vendor. Suppliers provide specialized inputs or deliverables to downstream process steps.
John makes valve covers and passes them onto Bill who then polishes the valve covers. Bill then sends the valve covers to Martha who packages the valve covers and ships them from Valves Made Easy to Valve's R' Us. Who are the Internal Suppliers in this process and who is the External Supplier in the Process?
**Place answers in the Comments Box Below**
Cycle time is the amount of time it takes to complete an individual operation or task from start to finish. Cycle time can be calculated with a stopwatch.
How to calculate Cycle time:
1. Define the start and end point.
2. At the start begin counting with a stopwatch, phone or other timekeeping device.
3. Stop when the operation or task is complete.
Challenge - Calculate the amount of cycle time it takes to pour a glass of water. Post your answers in the comments tab below.
The Master Production Schedule (MPS) is best defined by The Apics Dictionary, which is cited below.
A line on the master schedule grid that reflects the anticipated build schedule for those items assigned to the master scheduler. The master scheduler maintains this schedule and material requirements planning. It represents what the company plans to produce expressed in specific configurations, quantities and dates. It is not a sales item forecast that represents a statement of demand. It must take into account the forecast, the production plan and other important considerations such as backlog, availability of material, capacity and any other management policies and goals.
Material Requirements Planning is best defined by The Apics Dictionary which is noted below.
A set of techniques that uses the bill of material data, inventory data and the master production schedule to calculate requirements for materials. It makes further recommendations to release replenishment orders for materials. Further, because it is time-phased, it makes recommendations to reschedule open orders when due dates and need dates are not in phase. Time-phased begins with the items listed in the MPS and determines:
Reference: Apics Dictionary
** For more information on MRP or Planning please inquire below**
The door to door value stream refers to a value stream map or value stream process of internal operations/activities as they pertain to an organization. The door to door value stream stretches from the very first process step to the last activity within the organization.
Organizations will generally start their lean journey or identification process from the door to door level. This is because the organization has more influence on internal activities than they do at any other level of the value stream.
What is the very first step within your organization? What is the very last step within your organization?
**Place answers in the comments tab**
Enterprise resource planning (ERP) is a software that gives organizations to define, standardize and manage business processes. ERP is used to support planning and control of information throughout an organization so that they can use internal knowledge to achieve external advantage. ERP systems track resources such as: Cash, materials, capacity, orders, purchase orders and payroll.
Examples of ERP Systems:
For more information on ERP systems check out the book ERP, by: MHE. Apics is another organization that provides extensive knowledge in materials management and supply chain management. You can visit their website here: Apics
**For more information on streamlining and optimizing your erp system message us below.**
A pull system is a technique used to produce only what has a demand attached to it. Pull systems are also used to replace inventory items or information which may have been taken to fulfill a demand. Pull systems use triggers to notify individuals when a demand or a need has been generated for the part or service.
Dashboards allow the appropriate party to see at a glance, Key Performance Indicators (KPI's).
Examples of Dashboards:
Qualities of a good dashboard:
For more information on Dashboards visit our recommended reading: The Balanced Scorecard: Translating Strategy into Action, by Robert S. Kaplan and David P. Norton.
"Batching" or batch production is a technique used in both office and manufacturing environments. This type of production creates the object or activity over a series of workstations one stage at a time. The objects are created in "groups" or "batches."
Secondary Metrics are the additional metrics are the additional measurements established to help interpret the results of the primary metrics. Secondary metrics are often described as circumstantial evidence, despite this common reference, secondary metrics ensure that problems do not just change forms or move from one place to another.
If you were attempting to reduce a cycle time on a service orientated project your cycle time reduction would be the primary metric. But the secondary metric may be customer service or employee satisfaction.
Actual measurements are the measurements as they exist in fact. They are real measurements that are accompanied by objective evidence.
Samantha went to the store to buy Michelle her favorite popsicles while she was sick. Michelle asked Samantha how much money she would need. Samantha answered "about $5.00." After Samantha went to the store, Michelle asked for the change and the receipt. The receipt showed the popsicles were $3.50 and the change was $1.50.
What two amounts are considered "actual" amounts? **Place answers in comments below**
A forecast is a prediction of something to come or in the future. A forecast would take place before any type of action or activity happens. Forecasts are almost always wrong but they can be used to define a hope-for, goal, target or condition that you believe is attainable based on analysis and assessment.
Examples of Forecast
1. Educated Guessing
For further learning on forecasting techniques the book entitled Forecasting Methods and Applications gives good insight.
An estimate is defined as an approximate judgement, calculation or opinion regarding time, size, weight, worth etc. A good source to read about project estimating is the book titled project estimating and cost management.
A project budget is a comprehensive assessment or estimate of all costs related to a project. The project budget is more detailed than a high-level budget that may have been developed in the initial stages of project development.
What is included in a project budget?
1. Labor or manpower costs.
2. Material costs.
3. Direct costs such as training
4. Equipment costs including ongoing equipment fees.
5. Overhang and consulting fees
6. Project reserves or contingency planning
7. Subcontracting costs or vendor fees.
There may be other costs unique to your project. Keep in mind the project budget is your best estimate of how much the project will cost and ultimately determine the initial cost to benefit analysis for sponsorships decision.
Strategic planning is the process of developing a strategic plan. The strategic planning process is used to prioritize, focus, strengthen and ensure everyone is aligned towards a common goal. The disciplined activity of strategic planning produces actions and decisions that help form, shape and guide how the organization is defined, who it serves and what the organization's purpose is.
General Steps of Strategic Planning
1. Analyze and or assessment of where the organization currently stands.
2. High level forming and framework
Hoshin Kanri is one type of strategic planning.
The control phase is the final stage of the DMAIC methodology. It ensures that the improvements made continue to work and meet the requirements of the customer. The control phase all documents are finalized and monitoring plans are put into place along with response plans in order to ensure that everyone knows what to do if a process falls out of control.
Subscribe below and receive lean, six sigma, operations, supply chain, logistics, distribution and business terms in your mailbox.