This document discusses risk management as it relates to production and inventory. It addresses identifying unusable inventory and determining whether to keep, dispose of, or sell back. It also discusses setting target inventory levels and measuring them. Tools for reducing inventory like waste are outlined. Order lead time and ways to shorten it through suppliers are covered. Key risk indicators for inventory are proposed. Working with customers to gain competitive advantages is also mentioned.

1. Risk Management
Produzione & Inventario
Dick Lam

2. Agenda
1. Financial body check-up
2. Re-identification of core competence
3. Risk management: A/R
4. Risk management: Production & Inventory
5. Risk management: Cash
6. Risk management: People
7. In-depth meaning on Risk Management

3. Inventory Holding
• Inventory Aging Report

5. • Clearly identify what inventory can and
cannot be used
• Why are there so many unusable
– Re-visit the planning process…
– Any reward for minimize inventory level
without affecting order fulfillment
• Keep it or dispose it? Or sell back to
the suppliers
• Deferred customization
inventory?

6. Target Inventory
• What is your target inventory level?
• How do you measure it?

8. Tools for reduction
• 7 Waste
– Rework
– Excessive Production
– Conveyance
– Excessive Motion
– Waiting
– Inventory in production area (pull system)
– Inappropriate processing
• Reward people for cost saving idea &
action

9. Order Lead Time
• Time from the order placed by your
customers to the time you deliver to
them

10. • Unquestionably, customers prefer short
lead time to long
• What is the element in lead time?
• What is the bottleneck?
• How to shorten it?

11. • Suppliers
– Vendor Managed Inventory
– Consignment Inventory
– Equalize Minimum Order Quantity to Strict Priority Queue
– Order cancellation agreement
– Design-in to exploit opportunities
– Be transparent to the suppliers
• Come to visit my factories
– Go to visit your suppliers
– Exploit new suppliers

12. New Project Evaluation …..

13. • Capacity
– Indirect labor vs. Direct labor
– Salaried labor vs. Direct & Indirect Labor
– Let the employees to tell you
– But don’t forget to motivate them
• What to save?

14. Key Risk Indicators
• Inventory Days
• Obsolete Inventory vs. Inventory
Values
• Order Lead Time
• …..
• Inventory with days > target

15. When to produce for customers?
• Raw Material is converted to Finished
Goods
• Conversion cost is labor plus
Buying capacity reserve
(Book suppliers Production
capacity)
production capacity

16. Working with Customers
The competition
Better design
Faster to market
Value engineering in the supply chain
• Share the supplier expertise and obtain long-term relationship
Higher quality