Inventory turn over

In accounting, the Inventory turnover is a measure of the number of times inventory is sold or used in a time period such as a year. Theequation for inventory turnover equals the cost of goods sold divided by the average inventory. Inventory turnover is also known as inventory turns, stockturn, stock turns, turns, and stock turnover. The formula for inventory turnover:

The formula for average inventory:

Alternatively, the average days to sell the inventory may also be calculated as follows: [1]

Cycle Times and Bottlenecks In order to figure out how much inventory you need, you should really know your capacity. This post is going to go step by step and cover in detail the difference between throughput, cycle times, and bottlenecks. The example we'll look at is going to be a handbag manufacturer. The following steps, with their corresponding times, are required to produce a handbag: Process Leather cutting Zipper attachement Sewing Process Time 120 seconds 70 seconds 30 seconds

Throughput time
The times that are shown are the processing times. They represent how long it takes an individual bag to physically pass through each step. The throughput time is the total time it takes for a bag to physically pass through all steps. It is the sum of all the times and it is 220 seconds.

Cycle time
There are two cycle times. There is the cycle time for each station and there is the cycle time for the entire handbag manufacturing process. To determine this, you will need the

capacity which can be determined from the following table which shows how many workstations there are for each process. Process Stations available Cycle Time Leather Cutting 6 20 seconds Zipper Attachment Sewing 1 2 35 seconds 30 seconds

The cycle time for each station is the average amount of time it will take each bag to be completed. Assuming each station can process 1 bag at a time, cycle time is the process time divided by the number of workstations. Leather cutting for example takes 120 seconds per bag, but since there are 6 of them being worked on at a time, it is as if one bag is being completed every 20 seconds. Now to analyze the cycle times to determine the bottleneck. Bottleneck The bottleneck is the slowest cycle time in the process and it determines the rate at which the entire system can produce handbags. In other words, the bottleneck, which is the zipper attachment process, determines the capacity for the entire handbag manufacturing plant in our example. Here's how this works: Imagine you're standing at the end of the assembly line. You know it takes an individual bag 220 seconds to be processed from start to finish, but how long is the wait for individual bags at the end of the line. In other words, if you're standing at the end of the line, how much time elapses between finished bags? I'll give you a hint, it's a lot less than 220 seconds. Remember, during that 220 seconds, there are multiple bags being processed at any given point in time by the multiple work stations. The answer is once every 35 seconds. This is the time it takes on average per bag at the bottleneck and is therefore the time that elapses between each complete bag. At station 1, there is an average of 1 cut piece of leather transferred to station 2 every 20 seconds. Station 2, however, can only process 1 bag every 35 seconds. This means that station three only gets a new a bag to work on every 35 seconds. So, station 3 completes a bag in 30 seconds. But then it waits 5 more seconds until station 2 can finish its work and send over another bag. Therefore, station three sends one finished bag to the end of the production every 35 seconds. No matter how fast station 1 works, station two cannot handle anymore inventory than it's already getting. Also, no matter how fast station 3 works, the system will not produce bags at a faster rate. If station 3 could sew the bags together at a rate of 1 bag every 10 seconds, it wouldn't make a difference because station 3 would still have to wait for station two to supply it with more work in process. Only if the bottleneck is improved will the rest of the system improve.

That said, take a look at leather cutting. Is it really necessary to have six workstations. I can't see what's good about it. Even with only four workstations, it still operates faster than the bottleneck and therefore would be sufficient capacity. Currently, station one is over-producing. If station 1 were to produce non-stop, there would be no way station 2 could keep up and huge work in process inventory would be the result. A post in the near future will cover this topic in greater detail.

Fill Rate
Percentage of customer or consumption orders satisfied from stock at hand. It is a measure of an inventory's ability to meet demand. Also called demand satisfaction rate.

Six Sigma
DMAIC The DMAIC project methodology has five phases:

Define the problem, the voice of the customer, and the project goals, specifically. Measure key aspects of the current process and collect relevant data. Analyze the data to investigate and verify cause-and-effect relationships. Determine what the relationships are, and attempt to ensure that all factors have been considered. Seek out root cause of the defect under investigation. Improve or optimize the current process based upon data analysis using techniques such as design of experiments, poka yoke or mistake proofing, and standard work to create a new, future state process. Set up pilot runs to establish process capability. Control the future state process to ensure that any deviations from target are corrected before they result in defects. Implement control systems such as statistical process control, production boards, visual workplaces, and continuously monitor the process.

Sigma level

DPMO

Percent defective

Percentage yield

Shortterm Cpk

Long-term Cpk

691,462

69%

31%

0.33

0.17

308,538

31%

69%

0.67

0.17

66,807

6.7%

93.3%

1.00

0.5

6,210

0.62%

99.38%

1.33

0.83

233

0.023%

99.977%

1.67

1.17

3.4

0.00034%

99.99966%

2.00

1.5

0.019

0.0000019% 99.9999981%

2.33

1.83

Excel Pivot Table Fundamentals

Why are they called Pivot Tables ? - Well, basically they allow us to pivot our data via dragand-drop to produce meaningful information. This makes Pivot Tables interactive in that once the table is complete we can very easily see what effect moving (or pivoting) our data has on our information. This will become patently clear once you give Pivot Tables a go. Believe me, no matter how experienced you get at Pivot Tables there will always be an element of trial-and-error involved in producing the desired results! What this means is you will find yourself pivoting your table a lot! What would we use them for ?- We would use a Pivot Table to produce meaningful information from a table of information. Imagine you have a table of data that contains names, addresses, ages, occupations, phone numbers, postcodes etc. With a Pivot Table we could very easily and quickly find out:

How Many People Have The Same Names. How Many Postcodes Are The Same. A Count Of A Particular Occupation.

See Only People That Match A Particular Occupation. Find Out The Addresses Of People That Match A Postcode

In fact the list can go on and on! What is the advantage ? - Perhaps the biggest advantage to using Pivot Tables is the fact that we can generate and extract meaningful information from a large table of information within a matter of minutes. Or perhaps it is because they will not use up a lot of memory from your PC. In a lot of cases we could get the same results from a table of data by using Excels built in functions, but this would take more time and use far more memory. On top of this, if we wanted some new information we can simply drag-and-drop (pivot). We can also opt to have our information update each time we open the Workbook and/or by clicking refresh. Pivot Charts - In Excel 2000 Microsoft introduced Pivot Charts. These are simply charts that are read from the table created via the Pivot Table Wizard. In fact Pivot Tables are really no longer just Pivot Tables, they are now PivotTables and PivotChart Reports. These two features go hand-in-hand with each other. By this I mean, when you create a Pivot Table you can also create a Pivot Chart at the same time with no extra effort needed on your part. Pivot Charts allow us to create professional interactive charts that were previously not possible without either VBA or using Excel's Controls.

Excel GyanLearning VLOOKUP in Excel

As September approaches, I can count on a series of spreadsheet questions. One of the popular Excel tutorial requests is how do you look up a value on one Excel worksheet and use it on another Excel worksheet. For example, you need to translate a product number into a product name. One of my favorite Excel functions is the VLOOKUP function and it can help with this task.(Includes Excel VLOOKUP Example file) A recent case involved some voter registration data I needed to analyze. On one Excel spreadsheet, the voters party was listed as an alphanumeric value called "Pcode" and not the political party. This coding wasn't intuitive. For example, D was for American Independent Party, but some thought it meant Democratic Party.

One way to solve this problem is to create a worksheet with the Pcode and translation and have Excel use the VLOOKUP function for the party name. You might think of VLOOKUP as an Excel translator. I could then add a column called Political Party to my original worksheet to show the information from a lookup table.

Creating a Lookup Table

A lookup table includes the values you wish to "lookup" such as our Pcode and the translation such as political party. You can place this table on the same worksheet, but for this Excel tutorial I'll add a worksheet called "Political Party". How to Create a Lookup Table, 1. Right-click your spreadsheets tab and select Insert 2. On the Insert dialog, double-click Worksheet. This will be on the General tab. 3. Rename this new worksheet tab with a descriptive name such as Party Codes 4. In Column A, enter the unique values that exist on your main worksheet. In my example, these were the codes that showed in the Pcode column in the thumbnail. These values should be inascending order. 5. In Column B, enter the translated value. You can have more values in column A than appear on your main spreadsheet. For example, I have an entry for Citizen Party even though I didnt show a registered voter with that affiliation.

Using the VLOOKUP Function

Excels VLOOKUP function uses 4 pieces of information. The function panel may seem intimidating with the terms, but its simpler than it looks. (Note: If you have Excel 2007 or 2010, you can find an additional PDF file with updated screen prints in the resources section at the bottom.) To lookup a value using VLOOKUP, 1. Add your new column on your original worksheet that will display the info pulled from the Lookup table. In my example, I added a column called Political Party in Column D. This is where I will insert the Excel function.

2. Place your cursor in the first blank cell in that column. In my example, this is cell D2. 3. From the Insert menu, select Function. The Insert Function dialog will appear.

4. In the Search for a function: text box, type vlookup and click Go. 5. Highlight VLOOKUP and click OK.

Defining the VLOOKUP Values

After you click OK, Excels Function Arguments dialog appears and allows you to define the four values. Youll see that your starting cell and the formula bar show the beginning part of the

function =VLOOKUP(). The Function Arguments dialog adds the needed data elements that will display between (). For illustration purposes, I have overlaid the Party Codes worksheet on top to show the relationships.

1. Lookup_value Think of this field as your starting point. In my example, Ill click cell C2 so the value is filled in the dialog. I'm requesting Excel take the value of C2, which displays as the Pcode of A, and find the matching political party on my lookup table on the Party Codes worksheet. 2. Table_array This is the range for your lookup table. The range can be on your existing worksheet or another worksheet such as our Party Codes. When you click another tab and define the range, Excel prepends that tab name to the range such as Party Codes.

Rules & Caveats

There are several rules to remember about this table array. Rule 1 - The left column must contain the values being referenced. In other words, I couldnt have our first column be Political Party. Rule 2 - You cant have duplicate values in the leftmost column of the lookup range. I couldnt have two entries with the value A with one being Democratic party and another A for the Humanist party. Excel would complain. Rule 3 - When referencing a lookup table, you dont want your cell references to change when you drag and fill to populate the other cells with the VLOOKUP function. As example, if I want to use the same function in cells D3 through D7, I dont want my lookup cell references to shift each time I move down to the next cell. I need the cell references to be the same. After you define your range, you need to press F4 which will cycle through absolute and relative references. You want to select the option that includes a $ before your Column and Row. ( 'Party Codes'!$A$2:$B$45. ) You can get around this if you know how to use Excel name ranges.

Col_index_num This is the number of the column on your lookup table that has the information you need. In our example, we want column 2 from the Party Codes worksheet which has the name of the political party. Range-lookup this field defines how close a match should exist between your Lookup_value (C2) and the value in the leftmost column on our lookup table. In our case, we want an exact match so well use FALSE. After clicking various cells, my dialog looks like this:

You can see in the circled formula bar above, I now have more information based on my entries in the Function Argumentsdialog box. The other item of interest is that when you build these functions, Excel displays the result in the Formula result = text line. This is great feedback which can show if your function is on target. In our example, we can see Excel looked up the Pcode of A and returned the Political Party Democratic.

Copying the VLOOKUP Function to Other Cells

It doesnt make sense to use VLOOKUP for one cell in your Excel spreadsheet. Instead, I want to copy the function to other cells in the same column. To copy VLOOKUP to other column cells, 1. Click the cell containing the VLOOKUP arguments. In our example, this would be D2. 2. Grab the cell handle that displays in the lower right corner. 3. Left-click and drag down the cell handle to cover your column range. Note: If I hadnt changed to absolute reference as mentioned in Rule 3, I wouldve seen my table array entry shift by one cell as we dragged down through the other cells. VLOOKUP is a powerful Excel function that can leverage spreadsheet data from other sources. There are many ways you can benefit from this function. In this example, I used a 1:1 code translation, but you could also use it for group assignments. For example, you could assign state codes to a region such as CT, VT, and MA to a region called New England. And for the adventurous, you can use VLOOKUP in your Excel formulas.

Pivot Table
PivotTables are an interactive table that allow the user to group and summarize large amounts of data in a concise, tabular format for easier reporting and analysis. They can sort, count, and total the data, and are available in a variety of spreadsheet programs. One advantage of this feature in Excel is that it allows you to rearrange, hide, and display different category fields within the PivotTable to provide alternate views of the data. Read on to find out how to create your own pivot table in Excel.
EditSteps

Setting Up Your Pivot Table

1.

12

1. Click on the Data menu and choose PivotTable and PivotChart Report. (Note: in Excel 2007/2010 go to Insert>PivotTable)

PivotTables command - Click to enlarge

3
2. Answer the questions presented as follows in the photo below.

Questions, Questions - Click to enlarge4

2.

3. Specify the location of the data you are going to summarize. If you have your data in an Excel list that is currently open, Excel will automatically select the cell range. Click "Next."

3.
Once you've done that, click "Finish."

4. Ensure the New Worksheet option is selected after you click Next from the previous step.

Final step in creating a PivotTable - Click to enlarge

Assemble Your Pivot Table

1
1. If necessary, adjust the range in the Table/Range text box. This is located under the "Select a Table" option button. If the data source for your pivot table is an external database table created with a separate program, such as Access, click the "Use an External Data Source" option button. Click the "Choose Connection" button and then click the name of the connection in the Existing Connections dialog box. 2. Select the location for the pivot table. Excel's default mode builds the pivot table on a new worksheet it adds to the workbook. To make the pivot table appear on the same worksheet, click the "Existing Worksheet" option button. Indicate the location of the first cell of the new table in the "Location" text box.3 3. Click OK. Excel should add a new blank grid for the pivot table and display a PivotTable Field List task pane. This panel will be divided into two sections.
o

A "Choose fields to add to report" list box with the names of all the fields in the source data for the pivot table. o An area divided into four drop zones at the bottom: Report Filter, Column Labels, Row Labels and Values. 4. Assign the fields in the PivotTable Field List task pane to the various parts of the table. Drag a field name from the "Choose fields to add to report" list box into one of the four drop zones.5 5. Manipulate the pivot table as needed until your ideal results appear.

Understanding Excel Pivot Table Terminology

1.
pivot tables.

Brush up on key terms. There are several terms which may seem unclear upon cursory glance of the Excel

Report filter. This area contains the fields that enable you to page through the data summaries shown in the pivot table by filtering out sets of data. They act as the filters for the report. For example, if you designate the Year field from a table as a Report Filter, you can display data summaries in the pivot table for individual years or for all years represented in the table.

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PivotTable report.

Column labels. This area contains the fields that determine the arrangement of data shown in the columns of the pivot table. Row labels. This area contains the fields that determine the arrangement of data shown in the rows of the pivot table. Values. This area contains the fields that determine which data are presented in the cells of the pivot table they are the values that are summarized in its last column (totaled by default). Page field. A field from the source data that you assign to a page (or filter) orientation in a Data field. A field from the source data that contains values to be summarized. For example, Sum of Sales is a data field. Column field. A field from the source data that you assign to a column orientation in a PivotTable report. For example, Type is a column field. Item. A subcategory of a row, column, or page field. Row field. A field from the source data that you assign to a row orientation in a PivotTable report. For example, Region and Salesperson are row fields. Data area. The cells in a PivotTable report that contain summarized data.

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