Vendor Managed Inventory Decision Considerations

1
Vendor Managed Inventory Decision Considerations

• TEAMM Briefing
• September 2004

2
Life Before Vendor Management

• HILCO owned all material (2.3 million) paid
  annual interest on the cost
• No Cost Accounting Codes
• No real inventory management capability
• Supervision had no formal training
• Facilities were not organized/secure

3
Motives to Change

• Material unit cost reduction
• Improved access to new existing products
• Improved accountability/reduce losses
• Improved material flow
• Improved information flow

4
Decision Process

• Used Request For Proposal (RFP) Method
• Provided Solicitation to Professional Vendors
• Used shopping cart approach for product
  type/quantity based on previous year usage levels
• Received vendor briefings
• Visited vender warehouses existing Co-ops
• Involved Operations Accounting personnel at
  multiple levels

5
Decision Process (cont)

• Negotiated contract must include
• Guaranteed pricing
• Adequate on-site staffing
• Adequate on-site material storage
• 24/7 response capability
• Automation within 1 year
• HILCO inventory purchased by vendor

6
Bidders

• KBS
• Techline
• Cummings
• WESCO
• Note TEC did not offer these services at the
  time.

7
HILCO ChoseKBS

• Met all contract design criteria
• Had material lines deemed necessary by HILCO
• Site visits was most satisfactory
• Cost comparison was fairly even across the board

8
Extra Activities

• Joint inventory
• Material storage space new warehouse facilities
• Telecommunications intra-net access
• Regular staff meetings for operational
  considerations
• Vendor becomes part of the HILCO family

9
Results

• Inventory went from 2.3 million to 30,000
  losses dropped to near 0
• Staffing increased to handle flex crew
  schedules
• Unit cost dropped appreciably
• Automation occurred slower than expected
• HILCO satisfaction (at all levels) has been above
  expectations