3011 — Inventory Management

Course Block Description: 

Each of the three related courses in this course block provides essential information for effectively managing inventory. The three courses in the block are: An Overview of Inventory Management, Purchasing, and Monitoring and Measuring.

The content for this course is provided by Grant Howard, president of Grant Howard & Associates

Competencies: 

On completion of the course block the student will be able to:

• Use appropriate measures to determine inventory management effectiveness.
  
• Set and track inventory management objectives.
  
• Calculate the usage rate for any item.
  
• Determine appropriate safety levels for stock items.
  
• Use appropriate techniques for restrictive and nonrestrictive purchasing.
  
• Schedule and conduct cycle counting.
  
• Identify and deal with excess inventory.
  

Measurement: 

The financial objectives of inventory management are easily measured using standard formulae such as Turns, Turn & Earn, or GMROI. However, the customer service measures and measures for the specific skills and concepts taught in this course are more difficult. Some measures that you might use include:

• Customer survey results on questions regarding perceived fill levels.
  
• Lost orders and back orders as a percent of total orders.
  
• Level of excess inventory.
  
• The trend of "R" cost over time.
  
• Inventory accuracy as confirmed by scheduled cycle counts.
  

Reinforcement: 

Management can reinforce the skills taught in this course by:

• Reviewing and communicating customer opinions of service levels.
  
• Maintaining and posting inventory objectives versus actual.
  
• Setting appropriate goals (excess inventory level, fill rate, inventory accuracy, efficiency in receiving and putting away, etc.) and providing rewards for meeting them.

Management Involvement:

The course includes a number of Practical Application Exercises designed to help the learner develop a better understanding of specific concepts. The manager should let the learner know at the beginning of the course that he or she considers these PAEs important and will review the results of each one with the learner. The PAEs in the Inventory Management course are:

• 3011_01_01 - A brief (5-question) survey that the learner conducts to determine what co-workers in various areas think of current inventory levels and practices.
• 3011_02_06 - Asks the learner to calculate "K" costs and "R" costs.
  
• 3011_03_01 - Asks the learner to review and evaluate current inventory reports.
  
• 3011_03_03 - An evaluation of current cycle count practices.