Effective optimisation of your Inventory
Inventory optimisation, often means different things to different businesses, however what is certain is that holding Inventory is a necessary requirement to maintain supply.
Inventory optimisation could be described as holding the correct levels of stock to ensure supply during purchasing & manufacturing lead times, whilst taking into account environmental factors such as demand variations, operational issues and supply issues.
These environmental factors will often drive many inventory policies & processes.
Stock Holding or Inventory Targets
There is often much confusion as to what these actually mean and how to implement them. Too often we can be guided by price or by ‘we have always used them’ which can lead to capacity issues, waste and cash needlessly tied up.
In essence these targets should be comprised of two elements; cycle stock and safety stock.
Cycle stock is to cover the normal demand during the replenishment (buying) lead time. Safety stock is the additional inventory to protect against unusual or unexpected demand and supply fluctuations.
Safety stock is usually the part of the formula that mgt and businesses often, don’t fully appreciate. Calculating safety stock accurately, the inventory team will need to analyse product supply & demand history Vs. the agreed business forecast. This sounds more daunting than it actually is, with the correct planning, sales planning & KPI systems in place, this should be easy and simple to maintain in a time effective manner.
To complete a fully rounded analysis, service level needs to be taken into account, we often see / hear of targets of 99.5% or even higher, but maintaining these levels of service can come at a cost of higher levels of inventory.
Utilising such analysis will allow the business to optimise its inventory holding, identify threats, opportunities and develop strategic / operational partnerships with its supply base.
What Purely can do with you
We are experienced in inventory / stock modelling of both materials and Finished goods.
We will work with you to develop strategies and policies that fit your needs and aspirations.
- Integrated systems design & implementation
- Reducing costs / working capital throughout the process
- Scenario / what if analysis
- Inventory policies & procedures
- Full review of MOQ and stock ordering methodology
- Identification of threats / opportunities
- Consignment stocking
- Storage / Warehouse review
- KPI implementation