The law is related to Inventory at multiple locations.

Inventory at Multiple Locations – TheSquare Root Law
• X2= (X1) * √(n2/n1)
• Where:
o n1 = number of existing facilities
o n2 = number of future facilities
o X1 =  total inventory in existing facilities
o X2 = total inventory in future facilities

Thanks!!

Thank-you so much for providing me the info!

I could find the proof in David Maister's article "Centralization of Inventories
and the Square Root Law". If interested, I can mail it to you.

Thanks,
Prem


--- On Fri, 3/6/09, Dave Piasecki <dave@...> wrote:

> From: Dave Piasecki <dave@...>
> Subject: RE: [Distribution_Inventory_Control] Can someone tell me the proof of
Square Root Law?
> To: Distribution_Inventory_Control@yahoogroups.com
> Date: Friday, March 6, 2009, 11:28 AM
> I would just add that the term "square root law"
> is very misleading.
> Applying the square root to a ratio is used sometimes in
> statistics when you
> want to "soften" a ratio (often to reflect the
> law of large numbers). In the
> case of a distribution network, it can generally be assumed
> that if you
> expand from say 1 location to 4 locations, your inventory
> will increase but
> it will not be 4 times as much. Therefore we could try to
> take the square
> root of our ratio (4/1) to soften it (giving us a result of
> 2/1).
>
> Applying the square root to determine changes in inventory
> levels in a
> distribution network is often referred to as a "rule
> of thumb" but I think
> that too is a little too strong a term for this very rough
> means of
> estimating inventory levels. You would be far better off
> looking at the
> ordering policies you will use in these facilities, and
> using that as the
> basis of "simulating" what your inventory levels
> might be.
>
>
>
>              Dave Piasecki
>  <http://www.inventoryops.com/>
>
> From: Distribution_Inventory_Control@yahoogroups.com
> [mailto:Distribution_Inventory_Control@yahoogroups.com] On
> Behalf Of
> ultimate32123
> Sent: Wednesday, March 04, 2009 1:25 PM
> To: Distribution_Inventory_Control@yahoogroups.com
> Subject: [Distribution_Inventory_Control] Can someone tell
> me the proof of
> Square Root Law?
>
>
>
> The law is related to Inventory at multiple locations.
>
> Inventory at Multiple Locations - TheSquare Root Law
> . X2= (X1) * √(n2/n1)
> . Where:
> o n1 = number of existing facilities
> o n2 = number of future facilities
> o X1 = total inventory in existing facilities
> o X2 = total inventory in future facilities
>
> Thanks!!

May not be a 100% perfect method, but a start:

1. Measure and get the total cu. ft. worth of space your warehouse occupies
within your facility, divide this by the total cu. ft. of the entire facility.
Result gives you a percentage you can use to represent how much space within the
facility is dedicated to it's warehouse.
2. Count, and figure out the maximum number of "full skid" sized locations your
warehouse contains.  If you have different size locations throughout your
warehouse, use weighted counts (example: when counting, the largest locations
are worth 1, medium locations 0.5, small locations 0.25). Result is an approx.
location count.
3. Determine the monthly cost to operate the facility (lease, utilities,
insurance, taxes. If you want to capture material handling labor cost within
this figure, add the monthly labor cost in with this also.). Multiply this total
cost by the percentage you came up with in step 1.  Result is an approx. monthly
cost of your warehouse.
4. Take the monthly warehouse cost, divide by the number of counted locations,
gives you a cost-per-location-per-month figure.

Optional: divide the total cu. ft. from step 1 by the location count from step
2, gives you the crude number of cu. ft. per location.

-c39

--- In Distribution_Inventory_Control@yahoogroups.com, Basem Shahhal
<b_shahhal@...> wrote:
>
> Hi,
> i am looking for a method to calculate the cost of storing a pallet in the DC.
How can that be linked to the stock holding cost? please assist. thank you

True. The uses of this figure are pretty limited, I only use it when trying to
capture some extra "soft" cost savings with continuous improvement projects. 
Helps with figuring out how well the facility's space is being utilized from a
cost standpoint.

--- In Distribution_Inventory_Control@yahoogroups.com, "Dave Piasecki"
<dave@...> wrote:
>
> I would just add that you first need to know how you expect to use your
> "cost of storing a pallet". There are costs that may or may not apply
> depending upon the use. For example, if you are purely looking at the
> storage costs, you will find that most warehouses have a significant amount
> of space that is used for "processing" and not storage. You would not want
> to include the costs associated with this space in your calculation.
>
>
>
>              Dave Piasecki
>  <http://www.inventoryops.com/>
>
> From: Distribution_Inventory_Control@yahoogroups.com
> [mailto:Distribution_Inventory_Control@yahoogroups.com] On Behalf Of
> code3nine
> Sent: Tuesday, March 17, 2009 4:38 PM
> To: Distribution_Inventory_Control@yahoogroups.com
> Subject: [Distribution_Inventory_Control] Re: Can someone tell me the proof
> of Square Root Law?
>
>
>
> May not be a 100% perfect method, but a start:
>
> 1. Measure and get the total cu. ft. worth of space your warehouse occupies
> within your facility, divide this by the total cu. ft. of the entire
> facility. Result gives you a percentage you can use to represent how much
> space within the facility is dedicated to it's warehouse.
> 2. Count, and figure out the maximum number of "full skid" sized locations
> your warehouse contains. If you have different size locations throughout
> your warehouse, use weighted counts (example: when counting, the largest
> locations are worth 1, medium locations 0.5, small locations 0.25). Result
> is an approx. location count.
> 3. Determine the monthly cost to operate the facility (lease, utilities,
> insurance, taxes. If you want to capture material handling labor cost within
> this figure, add the monthly labor cost in with this also.). Multiply this
> total cost by the percentage you came up with in step 1. Result is an
> approx. monthly cost of your warehouse.
> 4. Take the monthly warehouse cost, divide by the number of counted
> locations, gives you a cost-per-location-per-month figure.
>
> Optional: divide the total cu. ft. from step 1 by the location count from
> step 2, gives you the crude number of cu. ft. per location.
>
> -c39
>
> --- In Distribution_Inventory_Control@yahoogroups.com
> <mailto:Distribution_Inventory_Control%40yahoogroups.com> , Basem Shahhal
> <b_shahhal@> wrote:
> >
> > Hi,
> > i am looking for a method to calculate the cost of storing a pallet in the
> DC. How can that be linked to the stock holding cost? please assist. thank
> you
>

Wouldn't recommend starting from scratch.
Look into a system like Syteline...
http://go.infor.com/erpsytelinedemo/

If you decide to develop one on your own, whatever you do, don't use Microsoft
Excel.

--- In Distribution_Inventory_Control@yahoogroups.com, "andrewwongyen"
<andrewwongyen@...> wrote:
>
> Hi I have been commissioned to scope an Inventroy Control System for
> the company I work for.
>
> We are a small to medium company (30 employees) on a rapid growth
> path. We supply a combined hardware and web service solution to the
> transport sector and track perishable foods through the supply cool
> chain using our own RF solutions for safety, tracking and quality
> assurance applications.
>
> We manufacture our own hardware and develop software in-house and I
> have been given a project to scope and assess the purchase or
> development of a system to help us manage and track inventory. We
> require the ability to:
>
> 1.       Order and track components for our end products
>
> 2.       Manage and track manufacture of our products (hardware- 3rd
> Party company that work for us 80% of their time)
>
> 3.       Manage and track finished product and maintain accurate
> inventory, re-order levels etc
>
> 4.       Manage units in the field as far as which customer has which
> units, for how long (warranty), which Data SIM card is in each unit
> etc
>
> 5.       Create std business docs – PO. Invoices, Sales Orders, BOMs
> etc
>
> 6.       Create monthly reports
>
> 7.       Web based or Intranet – we are a Microsoft Accredited partner
>
> 8.       Currently use MYOB for financials
>
>
>
> We are not a large company with offices opening outside of Australia
> (USA and NZ at the moment) and our market share growing we need a
> system to make sure we grow on an efficient base, we currently have
> all of our work flow and processes documented and now need a system
> to make sure we can manage our growth stage efficiently and
> accurately and manage costs.
>
>
>
> Can anyone offer some advice on how we should best approach this
> requirement – is there off the shelf products that get us most of the
> way there or do we need to develop from scratch?
>
>
>
> Thank You any advice would be greatly appreciated
>

Hello Everyone - I am looking for someone with experience with one of the
following inventory control systems: Stone Edge, Fishbowl Inventory or
Interprise to make an assessment & recommendation and stay on for the
implementation. If anyone is interested please contact me.

- Greg McDanel
630 401 0594
gregory.mcdanel@...

I am seeking an experienced Inventory and Materials Control Manager for a
manufacturing firm in the greater Chicago area.  The individual should have a
solid background in inventory management.  A CPIM is desirable.  If you are
interested please contact me for further details.  This is a confidential search
for this employer.

I have been in warehousing and transportation for 25 years and now wish to
advance by continuing my education. What courses could you recommend I take. I
have been reading several books that I saw on inventoryops.com(a very
informative site by the way)and gained some insight into the management of
warehouses, but feel secondary education is required to gain full knowledge.
Some of this is a little beyond my current level of understanding.

Dear all,

I made a inventory simulation with (Q,r), (S,s) ordering system using Matlab
Simulink software. I need real data from industry such as apparel industry,
supermarket, etc. I need real data for inventory cost related (ordering cost,
holding cost) and also demand data. The data will be used in the simulation. I
have tried with assumption data but in this case I need real data from industry.

Any body can help me with the data ?

I have a small sheet metal fab shop (20 employees total) and want to implement
an inventory program. Right now using Quickbooks 09 and excel spreadsheets for
end of year accounting.  I have a lot of small parts that we use, lots, bolts,
rivets, consumables and I learning by "the seat of my pants.  My shop guys are
monitering sheet metal counts per job and I am using Qb's to deduct from
inventory. I need some input from others..want to set up for real and keep
"real" track of my asset. Any help would be greatly appreciated.  Thanks, Jamie

Thanks Dave--First what is MRP?

I realize that tracking items that cost a few cents is not worth the time and
energy.  I am concerned about the higher dollar numbers.  Much of my materials
are purchased "job specific" My biggest concern is expensive metal.  My guys are
not giving me enough info on their purchase orders, like cost. for
example...they buy what they need for their current job and a few more for the
future....These items I am concerned about. I am trying to get a better idea of
what my jobs cost me and what the value of my inventory is.  I do not want to be
counting screws.  I also do not want to hire a specialist to come in, charge me
$30,000 and set something up that I cannot keep up with. Currently my shop guys
are telling where each sheet pulled is used for.  The "drop" pieces are used to
complete smaller builds..How to report and record this in a simple way is my
issue of the week. Perhaps I can find a google doc to fill out for easy data
entry later?

Thanks,



--- In Distribution_Inventory_Control@yahoogroups.com, "Dave Piasecki"
<dave@...> wrote:
>
> The tricky part comes down to figuring how far you want to go to track your
> inventory. As an inventory guy, I like to see an individual transaction
> every time inventory is moved, consumed, sold, received, scrapped, rejected,
> returned, etc.  But as a practical guy, I'm aware that this can sometimes be
> too much for certain types of businesses, especially small businesses. I
> regularly come into the aftermath of small manufacturers implementing
> "inventory systems" and I can tell you it is often not pretty. The problem
> usually is that they (management) commit to a certain level of tracking
> without thinking through what the impact will be on those that need to enter
> all these transactions, and the disaster that can result if they don't have
> the discipline to accurately enter these transactions 100% of the time. If
> you think you have problems now, be aware that a screwed up software
> implementation can make things a lot worse. Also be aware that screwed up
> software implementations tend to be the norm.
>
>
>
> Ok, so now that the warning is out of the way, if you plan on continuing to
> use Quickbooks, your best bet is to look for add-on inventory software that
> is designed for Quickbooks. This will somewhat limit your selection, but
> that's not necessarily a bad thing (there is a lot of inventory software out
> there, so limiting the selection may make the process easier for you). Plus,
> very small businesses can rarely afford the costs of integrating a 3rd party
> product that is not designed to work with their accounting system, and
> running 2 disconnected systems is usually a bad idea.  You also need to
> decide if you just want to just have an inventory tracking program or
> something more manufacturing-specific like an MRP product. I do think most
> manufacturers (even very small ones) should strongly consider an MRP-based
> inventory program, but once again, you need to have a clear understanding of
> what it is you are committing to when you go this route.
>
>
>
> You can start your search with a google search of:  quickbooks inventory add
> on
>
> And also: quickbooks mrp
>
>
>
>              Dave Piasecki
>  <http://www.inventoryops.com/>
>
> From: Distribution_Inventory_Control@yahoogroups.com
> [mailto:Distribution_Inventory_Control@yahoogroups.com] On Behalf Of Jamie
> Sent: Monday, December 14, 2009 9:35 AM
> To: Distribution_Inventory_Control@yahoogroups.com
> Subject: [Distribution_Inventory_Control] Need guidance
>
>
>
>
>
> I have a small sheet metal fab shop (20 employees total) and want to
> implement an inventory program. Right now using Quickbooks 09 and excel
> spreadsheets for end of year accounting. I have a lot of small parts that we
> use, lots, bolts, rivets, consumables and I learning by "the seat of my
> pants. My shop guys are monitering sheet metal counts per job and I am using
> Qb's to deduct from inventory. I need some input from others..want to set up
> for real and keep "real" track of my asset. Any help would be greatly
> appreciated. Thanks, Jamie
>

Dave, Can you see my frustration? The good old boys are used to ordering what
they need and not having to answer to anyone.  When we were very busy and the
jobs and money were flowing in, we didn't have the time to be so detail
oriented.  This has always been an issue for me but I have "taken the bull by
the horns" and  have shaken everyone up. I question every dime spent. I want to
know for what job the item has been purchased for.Their reason might be that
they have another job coming up without a contract, deposit or invoice/job# yet.
You know those jobs that are "between peoples ears" and not on the books yet? I
thought if I could find a group out there I could read posts and pick up some
ideas.  It seems the language is a bit over my head or we aren't talking about
the same thing. I appreciate you taking the time to post to me.  I will check
out all the links to this group and formulate dome ideas/questions....Thanks

--- In Distribution_Inventory_Control@yahoogroups.com, "Dave Piasecki"
<dave@...> wrote:
>
> You can check out my inventory glossary
> <http://www.inventoryops.com/dictionary.htm>  for a definition of MRP.
>
>
>
> And I'm not saying that tracking low cost items in not worth the effort (it
> generally is). It just depends on the specific operation.
>
>
>
> It sounds like you're a classic "job shop" operation and you should be able
> to find software that specifically targets job shops since they are rather
> common. Good job shop software should have a nice flow from the quoting
> process right through manufacturing.
>
>
>
> I think you need to educate yourself a little before jumping into this
> because you will have some important decisions to make related to how you
> track your inventory and your jobs. You'll need to make decisions related to
> what you set up as inventory items (items that you use regularly and have an
> item-master record for)  non-inventory items (special order items), and
> floor stock (a type of inventory item).
>
>
>
> And as an added comment, this statement you made is concerning
>
> "they buy what they need for their current job and a few more for the
> future"
>
>
>
>              Dave Piasecki
>  <http://www.inventoryops.com/>
>
> From: Distribution_Inventory_Control@yahoogroups.com
> [mailto:Distribution_Inventory_Control@yahoogroups.com] On Behalf Of Jamie
> Sent: Monday, December 14, 2009 12:43 PM
> To: Distribution_Inventory_Control@yahoogroups.com
> Subject: [Distribution_Inventory_Control] Re: Need guidance
>
>
>
>
>
> Thanks Dave--First what is MRP?
>
> I realize that tracking items that cost a few cents is not worth the time
> and energy. I am concerned about the higher dollar numbers. Much of my
> materials are purchased "job specific" My biggest concern is expensive
> metal. My guys are not giving me enough info on their purchase orders, like
> cost. for example...they buy what they need for their current job and a few
> more for the future....These items I am concerned about. I am trying to get
> a better idea of what my jobs cost me and what the value of my inventory is.
> I do not want to be counting screws. I also do not want to hire a specialist
> to come in, charge me $30,000 and set something up that I cannot keep up
> with. Currently my shop guys are telling where each sheet pulled is used
> for. The "drop" pieces are used to complete smaller builds..How to report
> and record this in a simple way is my issue of the week. Perhaps I can find
> a google doc to fill out for easy data entry later?
>
> Thanks,
>
> --- In Distribution_Inventory_Control@yahoogroups.com
> <mailto:Distribution_Inventory_Control%40yahoogroups.com> , "Dave Piasecki"
> <dave@> wrote:
> >
> > The tricky part comes down to figuring how far you want to go to track
> your
> > inventory. As an inventory guy, I like to see an individual transaction
> > every time inventory is moved, consumed, sold, received, scrapped,
> rejected,
> > returned, etc. But as a practical guy, I'm aware that this can sometimes
> be
> > too much for certain types of businesses, especially small businesses. I
> > regularly come into the aftermath of small manufacturers implementing
> > "inventory systems" and I can tell you it is often not pretty. The problem
> > usually is that they (management) commit to a certain level of tracking
> > without thinking through what the impact will be on those that need to
> enter
> > all these transactions, and the disaster that can result if they don't
> have
> > the discipline to accurately enter these transactions 100% of the time. If
> > you think you have problems now, be aware that a screwed up software
> > implementation can make things a lot worse. Also be aware that screwed up
> > software implementations tend to be the norm.
> >
> >
> >
> > Ok, so now that the warning is out of the way, if you plan on continuing
> to
> > use Quickbooks, your best bet is to look for add-on inventory software
> that
> > is designed for Quickbooks. This will somewhat limit your selection, but
> > that's not necessarily a bad thing (there is a lot of inventory software
> out
> > there, so limiting the selection may make the process easier for you).
> Plus,
> > very small businesses can rarely afford the costs of integrating a 3rd
> party
> > product that is not designed to work with their accounting system, and
> > running 2 disconnected systems is usually a bad idea. You also need to
> > decide if you just want to just have an inventory tracking program or
> > something more manufacturing-specific like an MRP product. I do think most
> > manufacturers (even very small ones) should strongly consider an MRP-based
> > inventory program, but once again, you need to have a clear understanding
> of
> > what it is you are committing to when you go this route.
> >
> >
> >
> > You can start your search with a google search of: quickbooks inventory
> add
> > on
> >
> > And also: quickbooks mrp
> >
> >
> >
> > Dave Piasecki
> > <http://www.inventoryops.com/>
> >
> > From: Distribution_Inventory_Control@yahoogroups.com
> <mailto:Distribution_Inventory_Control%40yahoogroups.com>
> > [mailto:Distribution_Inventory_Control@yahoogroups.com
> <mailto:Distribution_Inventory_Control%40yahoogroups.com> ] On Behalf Of
> Jamie
> > Sent: Monday, December 14, 2009 9:35 AM
> > To: Distribution_Inventory_Control@yahoogroups.com
> <mailto:Distribution_Inventory_Control%40yahoogroups.com>
> > Subject: [Distribution_Inventory_Control] Need guidance
> >
> >
> >
> >
> >
> > I have a small sheet metal fab shop (20 employees total) and want to
> > implement an inventory program. Right now using Quickbooks 09 and excel
> > spreadsheets for end of year accounting. I have a lot of small parts that
> we
> > use, lots, bolts, rivets, consumables and I learning by "the seat of my
> > pants. My shop guys are monitering sheet metal counts per job and I am
> using
> > Qb's to deduct from inventory. I need some input from others..want to set
> up
> > for real and keep "real" track of my asset. Any help would be greatly
> > appreciated. Thanks, Jamie
> >
>

I may have an opportunity that would be a greenfield warehouse with automation. 
At this point, I have no idea of the extent of the automation.  It might be RFID
with automated conveyors and mostly JIT deliveries so it's almost like a big
crossdock or could be AS/RS etc.
I need to get up to speed on the current thinking about automated warehouses. 
I've been out of distribution for about 5 years, and when I was in it, most of
our material didn't have the demand that would warrant automation, so receiving
to shipping was a manual operation.
Thanks for any suggestions of articles or books to read.
Scott

i recently got promoted to inventory control at my job.my past employment
experience has been in manufacturing.im looking for some help on finding a book
or tutorial to help me learn pkms..my head is spinning with all the information
i have learned so far.the person training me is doing a great job but i feel if
looked for some outside help with learning the system on my own time i could
learn more.please help....learning the system on the fly is stressful at work
and i would like to get a better understanding of it...thanks to anyone who may
be able to impart some info..