Managing Inventory for ROI

Located about 30 miles east of Lake Michigan and 160 miles north west of Detroit, Grand Rapids is the second largest city in Michigan and has approximately 190,000 residents.
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The City of Grand Rapids has a passion for improving—both in their business practices and the results they deliver. Grand Rapids is one of the most prolific users of Cityworks Storeroom, employing it not only to manage inventory, but also to analyze inventory usage, practices, and procedures, and to reduce costs in all areas of operation.
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Alen Ganic, inventory and asset manager, started implementing Storeroom for the Traffic & Safety Department and Sign Shop Division in 2012 after evaluating Cityworks and other inventory programs. When deciding whether to stay with Cityworks or look for a different inventory system, Ganic said the difference was that Cityworks listened. He talked with Steve Thomas and Jiajun Liu at Cityworks, and together they worked through the City’s workflow issues While he admitted that no system is perfect, Ganic felt the difference with Cityworks was the company listened and was willing to help.
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After determining Storeroom was the way to proceed, Ganic continued to make adjustments to the configuration and process flows, and became very familiar with the software and its capabilities. Following this rollout, he was able to implement Storeroom for other divisions, including the signal line crew and the Signal Tech and Street Lighting Divisions. As the number of facilities utilizing Storeroom increased, upper management responded to the increased access to information, which improved both communication and accountability—which in turn eased purchasing policies. As a result, Grand Rapids utilizes Storeroom to handle all of the City’s requisitions, receivables, issuances, transfers, and audits of all materials. In addition, all materials are barcoded so that key information can be quickly filled in and Bluetooth barcode scanners can be used with tablets in the storerooms.
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Through their implementation of Storeroom, Ganic has been able to review many areas not previously examined, including the accuracy of inventory levels both in excess and short. By tracking suppliers, for example, Ganic has been able to reduce the number of suppliers used and consolidate material purchasing and eliminate redundancies. This has also allowed Ganic to target suppliers who supply the majority of the City’s materials and partner to negotiate pricing and better delivery services.
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As part of the ongoing implementation, Ganic applied three key functions: ROP (Reorder Point), EOQ (Economic Order Quantity), and an ABC classification, allowing for greater inventory and material management. Prior to utilizing ROP and EOQ, an Excel spreadsheet was used to manage reorder points. ROP is a tool that helps determine when material needs to be reordered based on economic criteria, including lead times, safety stock, and daily demand, rather than just the minimum quantity level. The ABC classification allowed the facilities to focus efforts on high-value material and establishing a cycle count program based on material value and use. Class A items are about 20% of the inventory but 80% of the cost and are cycle counted monthly. Class B items are cycle counted quarterly, and class C items are cycle counted annually. Ganic uses the category option on materials in Designer to classify inventory. Categories include critical inventory, non-inventory, and regular inventory. Doing this allows Storeroom users to run searches and reports on these or other types of inventory to manage them.
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ROP, EOQ, and ABC rankings are all part of the Storeroom search criteria. Ordering at these specific points, using these modifications, provided significant cost savings. These efforts, initiated throughout the implementation and utilization of Storeroom, have identified which materials constitute the City’s active inventory and which do not, allowing city staff to reduce the amount of material on-site that is slow or not moving. These improvements also allowed staff to keep inventory levels at a point where they are realizing monetary savings by lowering previous levels and still maintaining levels for necessary work.
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With these changes, there was some concern that crews would run out of material too often, but Ganic proved this method to be more accurate while significantly reducing inventory cost. By using ROP, EOQ, ABC ranking, and other inventory management tools found in Storeroom, the City realized significant savings and ROI in the amount of $1.5 million in the first year. These steps have allowed the City to pass along the savings to customers as rate reductions.
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The City has established a great number of reports, charts, and graphs to regularly analyze metrics such as inventory value, inventory levels by year, inventory levels by storeroom, and more. These reports are then shared with specific people throughout the organization based on their needs and responsibilities. Everything is quantifiable, including the levels of staffing required to run their storerooms. The City utilizes the Cityworks inbox to display SharePoint reports that show KPIs, dashboards, and gauges, allowing both users and management to quickly view statuses. By implementing these measures, reports, and analytics, Ganic has developed a new model for the City
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Grand Rapids is in the process of moving from several storerooms to a centralized distribution center to increase organization and further reduce costs. Creating a central distribution center with satellite storerooms will reduce redundancy in ordering and stocking materials in multiple locations. This allows the City to leverage the cost savings afforded to them through bulk ordering and consolidation. The goal is also to improve employee work efficiency with on-site product deliveries. Storeroom has been a big reason why they are moving toward a true distribution center. The application will continue to support their efforts and grow along with them as they come online over the next couple of years.
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Asset management has been a big issue for the City, as well as an area that has been targeted for improvement. In the future, the City plans to expand the use of Cityworks with implementation of the core asset management analysis tools.

By Brad Johnson, Industry Practices Manager, Cityworks

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