Finished Goods Inventory Control

Transcribed from the printed issue; not yet reviewed. Read it in the PDF of the issue, page 70

The One-man Show¶

Dave Watson is in charge of my local off licence. He keeps track of several hundred different wines, beers, and soft drinks. Much of his day is spent re-stocking shelves and talking with customers. He also finds time to spend a lot of time talking with suppliers, going to wine-tasting parties, and reading the various speciality papers.

Peter Mason runs the large book store in the next town. He doesn’t buy from publishers himself, but has a number of experienced people, each one responsible for a department such as medical books, or children’s books, or business. Penny MacDonald deals with fiction and knows where a book is on the shelves, what is selling well, and what is going out.

Jean Wolstenholme sells upholstery and drapery fabric. She has a stock of several hundred different bolts of cloth. She spends a lot of time every day working with customers to help them choose the right material, and to estimate the length they need. She also reads decorating magazines, talks to salesmen, orders material and related supplies.

None of these successful businessmen uses a computer for anything. Each one manages several hundred to a few thousand different items. In talking with customers each one is fully aware of what is available from the suppliers. In talking to suppliers, each one is fully aware of what has been moving off the shelves. The decisions about how much of what to buy are instantaneously related to knowledge about what is available from suppliers.

The Large Corporation¶

Now consider any large corporation. The job there is too large for one person to cope with. For one thing the business is spread out all over the country, or all over the world. You just can’t stand in one place and see all the inventory. Hence it is necessary to specialise the job so that it can be parcelled out to different people.

The Purchasing organisation can buy raw materials on good terms from many suppliers, and knows a great deal about efficient means of manufacturing, and holding to quality standards. The Production Department knows a great deal about how to get things made.

Because of the separate organisations, Production doesn’t know a great deal about supply. The informal and instantaneous communication about supply and demand, that the High Street shopkeeper enjoys, requires considerable buffering in a large organisation. For many years inventory was a useful buffer between demand and supply. Inventory takes working capital (and space), and has a tendency to become obsolete.

There needs to be to be a better way of sharing supply and demand information, so that the corporation can make informed operating decisions as easily as the shopkeeper does. A computerised implementation of the concepts of MRP-II should unify supply and demand decisions.

Using MRP-II to Share Information¶

Every day or so, current stock and requirements at every location are automatically processed. This generates shipping requirements on the sources of supply (vendors or plants), so that current priorities of work can be adjusted to match current needs in the marketplace. The same information is used to decide how much of which products to send to each destination, so as to replenish stocks in the most efficient way.

Perhaps once a week, the information about stock status and requirements generates timed streams of notional orders (out to the planning horizon), for long-range visibility at the sources of supply (either plants or vendors).

In many businesses it isn’t necessary to revise the forecasts more often than once a month. The results of all calculations are immediately available to other calculations, so that it isn’t necessary to co-ordinate weekly production planning with monthly forecast revisions.

Whenever standard costs change, usually at the annual budgeting process, economic lot quantities and safety stocks can be revised.

With a single database in constant communication with order entry, manufacturing control, accounting, marketing and warehouse operations, the demand manager can see the impact of changes on availability from the supply side. The supply manager is working to meet a current, accurate and complete picture of what is really required in the field.

And it is all done in APL!¶

A major application product has been developed by R.G. Brown, one of the leading authorities in this field. Only one computer language was thought to be appropriate for this type of sophisticated decision support system - APL. This PC implementation is based on APL*PLUS/PC.