Description: In this How To you can use the Service Level Check List as a guide to try and identify areas that would negatively affect service level performance. This list does not include every possible scenario but does serve as a template for investigation. 1) Period End Exceptions Are your buyers completing their Period End Exceptions immediately after period end? Do they understand how to react to each type of PE exception check? This process must be done promptly and correctly at the end of each period. Failure to perform this action quickly and correctly will increase the risk of service level problems. This topic is listed as #1 on the K3S Checklist for a reason. 2) Clean Purchase Order File Are all incomplete supplier shipments verified immediately? If your purchase order system generates a supplier back order automatically for products that did not arrive complete, is that back order really valid? Some companies only clear their supplier back orders at the end of the month. That will not be acceptable for an advanced inventory replenishment environment. 3) Accept When Due Are your buyers approving purchase orders when K3S determines they are due? Some buyers wait, or control the approval process to their own liking. Orders must be approved when due, unless you have set the supplier up on a fixed cycle. If you are unable to approve all orders when they become due, please contact K3S to discuss. 4) Adjustments to Suggested Orders Are the buyers using the suggested order quantities developed by K3S, or are they changing a significant percentage of the dollars and lines suggested? You can run the K3S Purchase Adjustments Report to determine if the percentage of changes by the buyers is within a reasonable range for your industry. 5) Away at Shows or visiting Stores Are the buyers away from the office often enough to force them to order when it fits their schedule as opposed to when the inventory should be re-ordered? A properly set up supplier line should be replenished when a delay could jeopardize service level, and not because a buyer will be on vacation next week. Have the buyer assistant or another buyer approve your orders when you are out of the office. 6) Large Suppliers on Fixed Cycle Are your largest suppliers set up on a fixed cycle (weekly, where Order Cycle=7 days)? If not, they probably should be. Order Cycle times under 7 days become inefficient when either the supplier sits on your order, or the transportation company sits on your order. Most distributors have taken their largest suppliers and set them up as OC=7, for a particular day of the week. The supplier knows which day your order will arrive, and the transportation company will also know which day to deliver to you. Also, your warehouse will be ready for the big order to put away. This cycle ensures a much truer lead time. (Excluded from this topic would be suppliers that fit into the K3S Daily Replenishment model, such as the large cigarette manufacturers.) 7) Trouble in Receiving Has your environment changed in the receiving department that would negatively affect the ability to receive shipments into the computer on the day they arrive from the supplier? Have you included put away time in the supplier lead time information? 8) Supplier Shipping Short Do you have a supplier performance report to let you know when your suppliers are short shipping to you? When you run out of stock, is a shipment from the supplier coming in within the next day or so? 9) Increase in Business Have you experienced an increase in business? Picked up a new customer? Opened a new branch that is fed from your warehouse? The Forecasting Accuracy Report becomes extremely important to analyze this topic. Look at the last three periods for any trends occurring. 10) Valid Demand Information Is the K3S system receiving the correct demand information from the host? Are returns being subtracted from the sales history passed to the buying system? Are lost sales being included in the demand information? 11) Seasonal Profiles Do you have seasonal profiles on products that need them? Are the seasonal profiles currently in the system built correctly? Have the buyers accidentally created seasonal profiles with Factors of 0.00? 12) Lead Times Are your lead times correct? Do you use automatically updated lead times, or do your buyers control this information manually? Are your supplier and product lead times updated automatically, or just your product lead times? Is your system set to use the greater of the supplier and product lead times? 13) Order Cycles Do your suppliers have realistic Order Cycles? When was the last time that you set your Order Cycles? Does your supplier minimum information match the current Order Cycle setting? 14) Service Level Target What is your current Service Level Target plan? When was the last time that you reviewed your service level settings? Should they be reset? 15) Forecast Accuracy Report Look back at your last 6 months of Forecasting Accuracy Reports. Do you see a pattern that has developed in any of the categories? 16) Timely and Accurate Stock Status Information Does your system work with information that is current? When buying on Tuesday, the on hand and on order information should be as current as the billing from Monday night. If it is not, then you need to make provisions to increase the order points for each day the information is late. Also ensure that valid information is being fed to K3S daily. K3S provides tools to help you ‘scan’ the data to look for potential problems. 17) Alternate Source Orders Does your company use the K3S Alternate Source (or Diverter) facility? Are they delivering product on time and complete? Additional savings will not help the cause if they are not shipping to you in a timely and accurate manor. 18) Branch Inventory Discipline Does your company have multiple branch locations? If so, there are specific disciplines that must be followed to ensure proper inventory management practices. A few of these would be: Set specific "Authorized-Path-of-Replenishment" rules. Determine when one branch can use stock from another branch. 19) Day’s Work in a Day Is your company operating in the Day’s Work in a Day philosophy? Each person who performs a function affecting the accuracy of shelf-vs-computer counts (keying orders, filling orders, receiving, material putup, processing of returns, etc.) must complete all required activity before leaving each day, so that there is no paper or material “float” at day’s end. (definition from Glossary of Gordon Graham’s book Distribution Inventory Management for the 1990s, Inventory Management Press, 1987, page 307) 20) Forward bought inventory Do your buyers use the K3S Deal System to buy ‘extra inventory’ at the end of supplier deals, or do they make their own decisions about when and how much to order at the end of a deal? The K3S system has built in intelligence to understand this ‘extra inventory’ sitting in your warehouse when purchased through the K3S Deal System, and will ensure this ‘extra inventory’ does not mask the requirements of other products in a supplier line that may not have been on deal. The order delay facility (service point technique) takes this information into account when calculating the ‘when to order’ answer. 21) Promotional/Ad Planning Orders Do your buyers place promotional/ad orders for merchandise that exceeds normal replenishment requirements for your customers (or your stores)? If they do place promotional/ad orders, are they using the K3S Hold Out facility (or coding them some other way) so that these quantities on order, which eventually become on hand, are backed out of the balance calculations? If promotional/ad orders are not backed out of the balance calculations, the effect will be two fold: 1) those specific products in the promotion (or ad) will not be replenished for normal requirements, and 2) the ‘when to order’ calculation will be negatively affected, delaying the ‘order now due’ result and potentially hurting the service level achievement for products that are not in the promotion (or ad). |
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How To Research Service Level Issues: K3S-Replenish® Warehouse Service Level Checklist |