Inventory Target SettingInventory Target SettingGlobal Inventory Target Setting Processes : Top Down vs. Bottom UpProcessThe Overall Inventory Targets is the result or compromise between the regional bottom up targets and the top down directions (max. global level / required level of inventory turns)PremisesTop Down Targets have almost been finalized Use Bottom Up Targets from DRP DMT on Regional Level Need to set these up or update them Top Down DirectionsBottom Up TargetOverall Inventory TargetsTaken from Mikes December 2006 S&OP PackageManufacturing SiteCustomerPipeline StockReprocessingReprocessing C.C. WHS- Cycle Stock- Safety Stock - Aging Stock- Staging StockPipeline StockDistr.Center- Cycle Stock - Safety Stock Closed Coupled WarehouseCustomerDistribution CenterImportsRegionalInventory Targets Components & FlowComponentsThe inventory Targets are based on the following elements : Safety StockThis piece of inventory should protect against demand variability, forecast error and supply or lead-time variability. Its in Tons and will be calculated in the IP Tool*; Cycle FrequencyProduct Wheel for local Produced items / Frequency of imports for imported products (days) AgeThe minimal aging requirement before shipping (days) PipelineThe transit time from close coupled warehouse to other warehouse (days) Add-onAdditional volume for quality holds ,etc (days); Othersnot used anymore had been used to compensate reprocessing demand in SCCB Tool. Its solved now (days); StagingUsed to build up volume for large exports (days)Inventory Bands & Target The lower control levelSafety stock TargetSafety Stock + ( * Cycle Frequency) + Age + Pipeline + Others) + Stage The upper control level Target + Add-on Red : Calculated against the availability forecast Blue : Calculated against the export demand* instead of IP Tool I propose to use the spreadsheet from Ana-Laura (see next slide)Inventory Targets Components and CalculationSafety Stock CalculationTo calculate the safety stock, a spreadsheet from Ana Laura Xavier (SA) can be used. This is a simple and good way to calculate safety stock based on forecast accuracy (forecast vs. shipments) and a customer service level of 98% (can be adjusted).Target Setting WorkfileI re-build the DRP DMT Target Setting Tool in Excel. We can choose either to work on the regional targets off-line in excel or on-line in the DRP DMT (this will also transfer the data into UDA). Either way, the excel file is ideal to analyze data quickly and efficient (before loading into the DRP DMT)Inventory Targets Tools for Calculation