HML and SDE

HML and SDE are techniques used in inventory management to classify inventory items based on their value or cost.

HML stands for High-Medium-Low and is used to classify inventory items based on their unit cost. The HML classification of inventory items is as follows:

High-value items: These are inventory items with a high unit cost. These items are typically more expensive and may have a higher profit margin. Examples of high-value items might include luxury products, high-end electronics, or specialized machinery.

Medium-value items: These are inventory items with a moderate unit cost. These items may be more common or have a lower profit margin than high-value items. Examples of medium-value items might include standard components, basic raw materials, or office supplies.

Low-value items: These are inventory items with a low unit cost. These items are typically less expensive and may have a low profit margin. Examples of low-value items might include consumables, low-cost tools, or small hardware items.

SDE stands for Scarce-Difficult-Easy and is used to classify inventory items based on their availability. The SDE classification of inventory items is as follows:

Scarce items: These are inventory items that are difficult to obtain and have limited availability. These items may be critical to the organization’s operations and require special attention to ensure they are always in stock. Examples of scarce items might include rare raw materials, specialized equipment, or highly skilled labor.

Difficult items: These are inventory items that are moderately difficult to obtain and may have limited availability. These items may require additional effort or resources to obtain and may have longer lead times than other inventory items. Examples of difficult items might include specialized components, custom-made products, or unique raw materials.

Easy items: These are inventory items that are readily available and easy to obtain. These items may be common or have a high level of supply in the market. Examples of easy items might include standard components, basic raw materials, or common office supplies.

By classifying inventory items using HML and SDE analysis, organizations can prioritize their inventory management efforts and focus on ensuring that high-value and scarce or difficult items are always in stock while minimizing the inventory levels of low-value and easy items. This approach helps to ensure that the organization has the resources it needs to operate effectively while minimizing the cost of carrying inventory.

KANBAN

Kanban is a popular inventory control system used in manufacturing and supply chain management to optimize production processes and reduce waste. It is a Japanese word that translates to “visual signal” or “card.”

The Kanban system works by using visual cues to signal when inventory needs to be replenished. The system uses a series of cards or signals, known as Kanban cards, to trigger production and movement of inventory. The cards contain information such as the product name, quantity, and location.

When inventory levels reach a certain threshold, the Kanban card is triggered, indicating the need for more inventory to be produced or replenished. This signal prompts the production team to initiate the necessary activities to fulfill the request.

The Kanban system is based on the principles of just-in-time (JIT) production and lean manufacturing. By using Kanban, organizations can improve their inventory management by reducing excess inventory, optimizing production flow, and minimizing waste. This approach can lead to improved efficiency, reduced costs, and improved customer satisfaction.

Kanban is widely used in industries such as automotive manufacturing, electronics, and healthcare. The system has also been adopted in other industries, including software development and project management, to manage workflow and increase productivity.

Types of Inventories

Inventories can be classified into various types based on their nature, purpose, and stage in the production process. Here are some of the most common types of inventories:

Raw Materials Inventory: These are the basic materials required for manufacturing a product. Raw materials are typically stored until they are needed in the production process.

Work-in-Progress Inventory: These are the partially completed products that are currently in the production process. Work-in-progress inventory includes materials, labor, and overhead costs that have been applied to the product but are not yet completed.

Finished Goods Inventory: These are the completed products that are ready for sale. Finished goods inventory includes the costs of raw materials, labor, and overhead costs that have been applied to the product during the manufacturing process.

Maintenance, Repair, and Operating (MRO) Inventory: These are the materials and supplies required for the maintenance and repair of production equipment and facilities. MRO inventory includes items such as spare parts, lubricants, and cleaning supplies.

Consignment Inventory: These are goods that are held by a third-party supplier until they are sold by the retailer. Consignment inventory is not owned by the retailer until it is sold to a customer.

Safety Stock Inventory: This is the extra inventory that is held to protect against unexpected demand or supply chain disruptions. Safety stock inventory acts as a buffer to ensure that the organization has enough inventory to meet customer demand.

Anticipation Inventory: This is the inventory that is held in anticipation of future demand or price changes. Anticipation inventory is typically held for seasonal products or products with fluctuating demand.