SCOPE



Author: Armando Soto(Signature)Date:Author: Suzanne Smith(Signature)Date:Revised by:(Signature)Date:ApprovalApproving Manager:(Signature)Date:Quality Director:(Signature)Date:Safety Officer:(Signature)Date:Director of Operational Excellence:(Signature)Date:Document Control:(Signature)Date: TOC \o "1-3" \h \z \u 1.0SCOPE PAGEREF _Toc351468125 \h 12.0PURPOSE PAGEREF _Toc351468126 \h 23.0EXECUTION AND RESPONSIBILITY PAGEREF _Toc351468127 \h 24.0DEFINITIONS AND ABBREVIATIONS PAGEREF _Toc351468128 \h 2Definitions PAGEREF _Toc351468129 \h 2Abbreviations PAGEREF _Toc351468130 \h 25.0RELATED DOCUMENTS PAGEREF _Toc351468131 \h 36.0PROCEDURE OVERVIEW PAGEREF _Toc351468132 \h 37.0MSP’s High Value On-Hand Components List PAGEREF _Toc351468133 \h 48.0Inventory Selection Based on the High-Value On-Hand Components List PAGEREF _Toc351468134 \h 49.0Strong-Performing Items PAGEREF _Toc351468135 \h 610.0Weak-Performing Items PAGEREF _Toc351468136 \h 611.03-month SALES PERFORMANCE REVIEW PAGEREF _Toc351468137 \h 612.0 PAGEREF _Toc351468138 \h 6SCOPEThis document’s scope extends to any activity related to the reduction of excess component inventory at Relios facilities.PURPOSEThe purpose of this procedure is to reduce excess inventory by analyzing high-value inventory and recommending manufacturing builds of either the original design or alternative designs. This analysis will be performed by looking at the following data for each SKU (Stock-Keeping Unit): extended current sale price or last sale price, as applicable; sales data; and VOC (Voice of the Customer) information.The goal of inventory reduction is to free capital tied up in unused inventory by selling through it quickly at the best possible margin. In the long term, this has the added benefit of reducing the total cost related to holding inventory.EXECUTION AND RESPONSIBILITYThe Product Development, Planning, Manufacturing, Merchandising, E-Commerce, and Inventory Teams and all other cross-functional team members involved shall have a clear understanding of this procedure and execute their associated responsibilities with expediency, collaboration, quality, and continuous focus on communication and elevation of process constraints.Marketing team: CEO, CCO, Marketing personnel: responsible for approving the Merchandising Sales Planner’s (MSP’s) merce team: Responsible for making the product available according to the Marketing Calendar at retail and wholesale commerce points.Product Development team: Responsible for Macola setup, Spec Sheet creation, PIs and routings, standard costing, and responding to RFQs.Pilot Team: Pilot expeditor: responsible for the pilot process.Planning: Responsible for manufacturing build quantities, routing updates, and production shop orders.Inventory Specialist: Responsible for setting, adjusting and removing safety stock levels; creating the High Value Inventory Merchandising Lists; and updating the product life cycle of all items.Merchandising Sales Planner: Initiating RFQs; creating presentation to Marketing and Commerce teams with items and the manufacturing quantity, safety stock level, and recommended actions for each item.Customer Service: Entering and removing build orders in coordination with the cross-functional team members.DEFINITIONS AND ABBREVIATIONSDefinitionsHigh-value inventory: our inventory which has high value at the extended current sale price, determined by the current sale price or the inventory on hand. AbbreviationsBOM: Bill of MaterialsMSP: Merchandising Sales PlannerPD: Product DevelopmentPI: Product InstructionsPLC: Product Life CycleRFQ: Request for QuotesRTV: Return to VendorSKU: Stock-keeping unitVOC: Voice of the CustomerRELATED DOCUMENTSSOP – High-Value Inventory Merchandising Lists, and related flowchartSOP – Master PLC Change Process, and related flowchartSOP – Pricing Business RulesSOP – Creative to CommerceSeasonal PLC Inventory Management Process FlowchartBuild Calculator (an Excel-based tool used to calculate labor costs associated with building a given item).PROCEDURE OVERVIEWThe Inventory Reduction Process is a tool that allows Relios to use excess component inventory on hand, either by running production builds that match the original BOM or by utilizing alternative components (primarily stones) that match the specifications of the existing excess components, and then making the new products available, potentially to more than one customer. The coordination of all processes is critical to ensure pilot and production runs successfully produce finished goods with the necessary quality attributes and costs.The two main inventory components to be used for the recommendation of potential manufacturing builds are silver castings, and stones. Silver castings and high-value stones are the drivers of this process, since the combined inventory value of this type of component will far exceed the value of other components.The Merchandising Sales Planner (MSP) reviews all available sales and VOC data on the finished goods that have available excess component inventory. The MSP will make recommendations for potential manufacturing builds, either of finished goods matching the original BOM, or new designs based on alternative components (different sizes, colors, stones, etc) that will require modifications to the BOM, routings, Product Instructions (PI), etc. The VOC is one factor the MSP reviews to predict good sales performance. The Marketing team determines commerce points such as price, promotional vehicles and sales channels (see SOP – Business Pricing Rules for details.)Production runs are planned to coincide with marketing efforts or to support the replenishment of inventory.MSP’s High Value On-Hand Components ListTo form her recommendations, the MSP will perform a data analysis using a list obtained as follows.Run Macola crystal report on specific lower level category > Items by Location by value. Sort by largest value to smallest extended value.In Macola, go to Single Level Where Used. Enter the component item number to retrieve the finished item’s number.Pull up the BOM and image for the finished item.Using the Multiple Level Item view, review if everything needed to build the finished item is available. Obtain quantities of all items.Using the Indented Cost view, obtain the silver weight and cost, material and stone cost, and labor and total build cost.From VendorPal, obtain the following data: sales, sale price, return rate, customer rating, and any additional available notes.Create a spreadsheet with the following:Image – can be found at I:\RELIOS_DOCS\NEW PI\PhotosItem numberStone and component numbers, with on-hand quantities availableTotal build quantity and suggestionsRe-color suggestions, based on the crystal report in step 1.Total cost of materialsTotal cost of laborVendorPal dataSend the spreadsheet to the Inventory Manager, Inventory Supervisor & Dispatch SME to cycle count castings and stones, and confirm whether any alternate stones fit the castings. There is a 2-day turnaround on the cycle count and fit check.Review spreadsheet with the CEO for approval on builds and recolor options.Send spreadsheet to PD, Planning and the Inventory Specialist for information and action.PD builds BOMs if needed, creates routings and reviews costing if necessary.Planning schedules builds and releases shop orders.Inventory Selection Based on the High-Value On-Hand Components ListNext, the MSP identifies the top 5 components with the largest inventory in terms of extended value.The MSP now checks: Are the required stones, components and mold(s) in stock to build according to the BOM?If the answer is no, the MSP identifies alternative stones that will fit the silver components, and determines their cost.If the answer is yes, she will proceed by reviewing all available sales data. The data will include SKU, sales rate, customer ratings with at least two good and two bad customer comments, last sale price, current sale price, etc. The MSP presents the list of potential designs and their costs to the CEO, CCO and the sales channel responsible parties. Those designs approved by the CEO and CCO must then be approved by the Director of Manufacturing and Director of Planning.If any of the recommendations is not approved, the silver metal components will be scrapped with the CEO’s approval.If recommendations are approved, then the MSP shares the data spreadsheet with the PD team. The PD team creates or updates as necessary the spec sheets, routings, BOMs, etc. The PD team shares new SKU numbers with the MSP so that the MSP can request Customer Service to enter a new build order. Refer to SOP – Creative to Commerce for details on this process.Approved recommendations are then shared with the Planning Team, and items are set up for MRP and the planning scheduling process. Once the new build order is entered, Planning schedules new shop orders, which will be identified with a leading 5. Upper-level manufacturing shop orders are scheduled and released to inventory. The scheduling of upper level shop orders assumes the MRP has identified any potential purchase recommendations for stones. The Planning Team will proceed to order stones from supplier when three conditions are met:There is a firm order in the system (or approval to buy for MSP’s recommendations)The Safety Stock is driving requirements (Core PLC SKU’s).The Director of Planning has approved the ponents are picked to the shop order, and issued out to the shop floor to begin manufacturing.Designs will not be subject to the pilot process.Once the build is complete, the Planning team notifies Customer Service to remove the build order from the system.Inventory allocation for samples and finished goods inventory will follow the SOP – Creative to Commerce.E-Commerce and Marketing steps will likewise be the same as those for all other finished goods as defined in the SOP – Creative to Commerce.Initially, the product life cycle stage of these items will be “New,” and no safety stock quantity will be set. This is because the purpose of building these items initially is to eliminate excess inventory.The item will be built until the supply of stones is exhausted. At that point, on-hand inventory has successfully been consumed. The monthly sales data review by the Marketing Team and the MSP, and the monthly PLC review by the Inventory Specialist, will determine whether the item will continue to be built.Strong-Performing ItemsIf the monthly sales data review and the monthly PLC review show that the item has been selling well, and the team can reasonably forecast that the sales trend will continue, then they will determine an appropriate ongoing build quantity and continue to monitor sales.Strong-performing items will be set to PLC stage “Core” and safety stock levels will be set based on the rules in the Seasonal PLC Inventory Management Process Flowchart. See “CORE Safety Stock (SS) Logic” in that flowchart.If an item’s performance increases, safety stock levels will be increased incrementally.If sales reach $7k, the item will be added to the Core Excess $7K+ List and handled as shown in SOP – High-Value Inventory Merchandising Lists.Weak-Performing ItemsWhen an item is underperforming, the MSP will make a recommendation to the Inventory Specialist to either adjust or remove the safety stock for that SKU. The Inventory Specialist will set the Item Master Activity Code to Obsolete. This information is then relayed by the Inventory Specialist to the Planning team, and they in turn are responsible for disabling Macola’s Supplier Relations feature for that SKU. This prevents the unintended/unapproved purchase of stones. When safety stock is removed from an item, the Inventory Specialist and the Inventory Manager collaborate to dispose of any lower level components’ stock balance in the inventory area.3-month SALES PERFORMANCE REVIEWThe MSP tracks all items’ sales performance for a period of three months. If the item is performing well, the MSP recommends setting the item’s PLC stage to Core/Seasonal, with corresponding Safety Stock. If the items show signs of underperforming, the MSP in collaboration with the Inventory Specialist can recommend the items be “killed” (retired). Revision No. Effective Date: Remarks:00First release is 00. Revisions will be 1, 2 etc ................
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