This document discusses challenges with inventory management and emerging solutions using big data analytics. Effective inventory control balances meeting customer needs while keeping inventory levels as low as possible. However, inventory management is complicated by conflicting objectives within companies and unpredictable supply and demand. New inventory optimization tools use big data from ERP systems to more accurately analyze trends, forecast demand, and recommend optimal inventory levels and replenishment schedules to reduce costs while maintaining customer satisfaction. These tools help companies better balance the trade-offs between avoiding stock-outs and overstocking.
A project on inventory management. The necessity of effective inventory management is being increasingly realized in industrial and non-industrial organization both in India and abroad. This realization has come about because of increasing complexity of the task of managers and administrators. In most organization, the problem of effective inventory control is now viewed as the most critical problem with changes in social climate. While these can be great assets to the organizations, they become problems if the organization is not able to manage inventory properly.
Liquidity and profitability are the two vital aspects of corporate business. Any business cannot run without these two. A firm may run without profits for sometime; but with no liquidity, the firm cannot run their business. That is why management of inventory is an integral part of corporate planning in business life.
The proper inventory control system leads to an optimum utilization of resources. Idle materials are of a financial burden to the organization. Thus proper, inventory management directly assists in efficient functioning of the company. S.L. Goel says “takecare of the forest, the tree will take care of itself”, it should be the main motto of an inventory controller.
In inventory management, various methods and techniques can be adopted to control the inventory like, prompt maintenance of registrars, proper raw material arrangement, and fixation of various control levels and application of inventory control techniques and bin card system etc, which are relevant for inventory control in stores department.
Inventory management will help an organization in dealing with the supply of the raw materials and other activity in order to achieve the maximum co-ordination and optimum expenditure on materials to increase the profits of the firm. CLA‟s inventory control system is chosen for the study; by the investigator is no expectation in view of growing significance of the efficient control of inventories. Hence, the researcher was prompted to take up this topic.
The Impact of Inventory Management on Manufacuring Industryinventionjournals
Inventory is generally considered to comprise in three main areas which are raw materials, work in progress and finished goods. Where these are held and in what quantities, and how they are managed will vary significantly from one organization to another. The activities of inventory management involves are identifying inventory requirements, setting targets, providing replenishment techniques and options, monitoring item usages, reconciling the inventory balances, and reporting inventory status. In order to have clear inventory management, a company should not only focus on logistic management but also on sales and purchase management. Inventory management and control is not only the responsibility of the accounting department and the warehouse, but also the responsibility of the entire organization. Actually, there are many departments involved in the inventory management and control process, such as sales, purchasing, production, logistics and accounting. All these departments must work together in order to achieve effective inventory controls. Inventory includes raw material in progress, finished products, general Suppliers and equipment etc. inventory control may defined as systematic location, storage and Recording of goods in such a way that desired degree of service can be made to the operating shops at minimum ultimate cost. The need for inventory control is to maintain stock of goods and ensure Manufacturing according to the production schedule based on sale requirement and the lowest possible ultimate cost to the customer. Every enterprise needs inventory for smooth running of activities, it serves as link between production and distribution process and there is general time lag between the recognition of a need and its fulfillment. The greater time lag, the higher the requirement for inventory. The unforeseen fluctuation in demand and supply of goods also necessitate the need for inventory as it provides cushion for future price fluctuation. This paper includes the concept of inventory management, nature of inventory management, materials management techniques and inventory accounting
Hi Friends
This is supa bouy
I am a mentor, Friend for all Management Aspirants, Any query related to anything in Management, Do write me @ supabuoy@gmail.com.
I will try to assist the best way I can.
Cheers to lyf…!!!
Supa Bouy
Helping CFOs, COOs, and Supply Chain Heads of diverse blue-chip manufacturing organizations improve working capital, budgeting, planning, and risk management through inventory optimization analytics
A project on inventory management. The necessity of effective inventory management is being increasingly realized in industrial and non-industrial organization both in India and abroad. This realization has come about because of increasing complexity of the task of managers and administrators. In most organization, the problem of effective inventory control is now viewed as the most critical problem with changes in social climate. While these can be great assets to the organizations, they become problems if the organization is not able to manage inventory properly.
Liquidity and profitability are the two vital aspects of corporate business. Any business cannot run without these two. A firm may run without profits for sometime; but with no liquidity, the firm cannot run their business. That is why management of inventory is an integral part of corporate planning in business life.
The proper inventory control system leads to an optimum utilization of resources. Idle materials are of a financial burden to the organization. Thus proper, inventory management directly assists in efficient functioning of the company. S.L. Goel says “takecare of the forest, the tree will take care of itself”, it should be the main motto of an inventory controller.
In inventory management, various methods and techniques can be adopted to control the inventory like, prompt maintenance of registrars, proper raw material arrangement, and fixation of various control levels and application of inventory control techniques and bin card system etc, which are relevant for inventory control in stores department.
Inventory management will help an organization in dealing with the supply of the raw materials and other activity in order to achieve the maximum co-ordination and optimum expenditure on materials to increase the profits of the firm. CLA‟s inventory control system is chosen for the study; by the investigator is no expectation in view of growing significance of the efficient control of inventories. Hence, the researcher was prompted to take up this topic.
The Impact of Inventory Management on Manufacuring Industryinventionjournals
Inventory is generally considered to comprise in three main areas which are raw materials, work in progress and finished goods. Where these are held and in what quantities, and how they are managed will vary significantly from one organization to another. The activities of inventory management involves are identifying inventory requirements, setting targets, providing replenishment techniques and options, monitoring item usages, reconciling the inventory balances, and reporting inventory status. In order to have clear inventory management, a company should not only focus on logistic management but also on sales and purchase management. Inventory management and control is not only the responsibility of the accounting department and the warehouse, but also the responsibility of the entire organization. Actually, there are many departments involved in the inventory management and control process, such as sales, purchasing, production, logistics and accounting. All these departments must work together in order to achieve effective inventory controls. Inventory includes raw material in progress, finished products, general Suppliers and equipment etc. inventory control may defined as systematic location, storage and Recording of goods in such a way that desired degree of service can be made to the operating shops at minimum ultimate cost. The need for inventory control is to maintain stock of goods and ensure Manufacturing according to the production schedule based on sale requirement and the lowest possible ultimate cost to the customer. Every enterprise needs inventory for smooth running of activities, it serves as link between production and distribution process and there is general time lag between the recognition of a need and its fulfillment. The greater time lag, the higher the requirement for inventory. The unforeseen fluctuation in demand and supply of goods also necessitate the need for inventory as it provides cushion for future price fluctuation. This paper includes the concept of inventory management, nature of inventory management, materials management techniques and inventory accounting
Hi Friends
This is supa bouy
I am a mentor, Friend for all Management Aspirants, Any query related to anything in Management, Do write me @ supabuoy@gmail.com.
I will try to assist the best way I can.
Cheers to lyf…!!!
Supa Bouy
Helping CFOs, COOs, and Supply Chain Heads of diverse blue-chip manufacturing organizations improve working capital, budgeting, planning, and risk management through inventory optimization analytics
Importance Of Inventory Level Optimization to Enhance Business Performance Kaveen Gayathma
Inventories are actually money converted to the form of physical goods, stored in a warehouse, waiting to be converted back to money. Tying up money in this form is inevitable in order to conduct businesses in competitive and profitable manner. But it is not logical to build up inventories without a real demand driven reason to do so.
The Supply Chain Management has the potential to improve Company’s competitiveness. Supply chain capability is as important to a company's overall strategy as overall product strategy. It encourages management of processes across departments. By linking supply chain objectives to company strategy, decisions can be made between competing demands on the supply chain. The impact of managing overall product demand and the supply of product will impact the profitability of the company.
material management ppt describe the what is material management, aim of material management, objective of material management and function of material management
The HR Software Buyers Guide and Checklist. We want to make the HR software purchase process as painless as possible and help you find the right HR software solution for your needs whether that solution is Sage HRMS or another.
Importance Of Inventory Level Optimization to Enhance Business Performance Kaveen Gayathma
Inventories are actually money converted to the form of physical goods, stored in a warehouse, waiting to be converted back to money. Tying up money in this form is inevitable in order to conduct businesses in competitive and profitable manner. But it is not logical to build up inventories without a real demand driven reason to do so.
The Supply Chain Management has the potential to improve Company’s competitiveness. Supply chain capability is as important to a company's overall strategy as overall product strategy. It encourages management of processes across departments. By linking supply chain objectives to company strategy, decisions can be made between competing demands on the supply chain. The impact of managing overall product demand and the supply of product will impact the profitability of the company.
material management ppt describe the what is material management, aim of material management, objective of material management and function of material management
The HR Software Buyers Guide and Checklist. We want to make the HR software purchase process as painless as possible and help you find the right HR software solution for your needs whether that solution is Sage HRMS or another.
Inventory Management: How Incremental Improvements Drive Big GainsCognizant
By feeding social and mobile data into planning systems and overlaying analytics, manufacturers and retailers can reduce inventory waste and more precisely target customers.
Logistics Management, BBA III Year Notes, Osmania UniversityBalasri Kamarapu
Inventory Management in Supply chain – Role and importance of inventory in SC, Inventory Policies, Inventory as an element of customer service, JIT, BBA Notes
Unlocking Efficiency and Accuracy: The Essence of Stock Verification with Sap...Sapient Services
Stock verification is a crucial process for businesses across industries, enabling them to maintain accurate inventory records, minimize losses, and optimize operational efficiency. This comprehensive overview explores the fundamentals of stock verification, highlighting its importance, objectives, and key methods. By understanding its significance and implementing appropriate strategies, organizations can streamline their supply chain operations, enhance customer satisfaction, and make informed business decisions.
VILA HEALTH PACEMAKER INVENTORY Jon DoeBHA4110.docxlillie234567
VILA HEALTH
PACEMAKER INVENTORY
Jon Doe
BHA4110
Capella University
October 2021
1
Overview of Inventory Control
Inventory control is to minimize the total cost of inventory.
Inventory Models Goals
How much to order
Where to cut cost
Which is going quickly
How much deadstock
What is increasing holding cost
Inventory management is one of the essential assessments that every company must perform in order to be able to keep track of the production process smoothly and avoid any kind of interruption in the process(Heizer et al., 2017). A prominent inventory is considered a core component of the supply chain and is where all areas of the supply chain come together in tandem. Inventory control includes several different aspects such as controlling and overseeing purchases from suppliers and customers, maintaining the storage of stock, controlling the amount of product for sale and order fulfillment. The goal is to have the correct product in the needed quantity at the right location at the right time for the lowest total cost.
2
Overview of Inventory Control
Economic Order Quantity (EOQ) minimizes
Inventory cost
Holding cost
Shortage cost
Ordering cost
ABC Analysis
(Kwon et al. 2016)
Economic order quantity (EOQ) is the ideal order quantity a company should purchase to minimize inventory costs such as holding costs, shortage costs, and order costs. This production-scheduling model was developed in 1913 by Ford W. Harris and has been refined over time. The formula assumes that demand, ordering, and holding costs all remain constant. Holding costs are those associated with storing inventory that remains unsold. These costs are one component of total inventory costs, along with ordering and shortage costs. A firm’s holding costs include the price of goods damaged or spoiled, as well as that of storage space, labor, and insurance.
Ordering costs are the expenses incurred to create and process an order to a supplier. These costs are included in the determination of the economic order quantity (EOG) for an inventory item like the pacemaker. One strategy Vila Health can use in a perpetual system is ABC analysis. This classifies inventory items based on the item’s consumption value. That value is the total value of a piece of inventory consumed over a specific time frame. The letters stand for the different categories items can be placed into.
3
REVIEW OF EOQ PURPOSE AND DATA
Prior year 2019 Pacemaker annual use 2,500
Current year 11th month usage 2109
Current year projected demand 2301
Pacemaker cost $35
Per pacemaker holding cost is $1.75
Set up cost is $300
Ordering cost is $175
Order quantity is 400
4
Recommendation for Inventory Ordering
RTLS- Real-Time Location System
Tracking assets, (pacemaker)
Tracking patients (recipient of pacemaker)
CMMS- Computerized Maintenance Management software
utilization and availability of pacemaker
(McClanahan, 2020)
A real-time location system (RTLS), can help hos.
Stock Verification is a critical aspect of effective asset management for businesses of all sizes. Sapient Services specializes in providing comprehensive Stock Verification services designed to bring accuracy, transparency, and control to your inventory management processes.
6 inventory control techniques for stock optimizationSalesBabuCRM
Inventory management is the process of tracking every stock which comes in and goes out of a warehouse starting from manufacturing till the final product delivery. There are many inventory management techniques and softwares which have many efficient ways of controlling our company’s stock and improving overall business revenue.
Inventory is often the largest priced asset of a business after the fixed asset. Keeping the inventory also means keeping a tab on the realizable value, market value of all the stocks, stock in production and finished stock. This paper explores the challenges of manual inventory management system for supermarkets and infers solutions to the current challenges by designing a computerized inventory management system to order and update the stocks. The main method used for this research work is interview. Data were collected from 5 heterogeneous supermarkets and used as a tool for obtaining facts. When the goods were supplied the update of the stocks were being taken from time to time. The finding shows the challenges facing the manual system of inventory management system; the manual system requires everyday counting of items in the inventory, human errors are very prevalent during counting and recording and in case of disaster like fire or flood or poor communication, all the manual inventory records will be damaged and irretrievable. Based on the findings this paper highlights the possible solutions to the above problems; a computerized inventory management system to order and update the stocks was designed and goods were supplied to implement the possible solutions.
Explore our most comprehensive guide on lookback analysis at SafePaaS, covering access governance and how it can transform modern ERP audits. Browse now!
What is the TDS Return Filing Due Date for FY 2024-25.pdfseoforlegalpillers
It is crucial for the taxpayers to understand about the TDS Return Filing Due Date, so that they can fulfill your TDS obligations efficiently. Taxpayers can avoid penalties by sticking to the deadlines and by accurate filing of TDS. Timely filing of TDS will make sure about the availability of tax credits. You can also seek the professional guidance of experts like Legal Pillers for timely filing of the TDS Return.
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HR recruiter services offer top talents to companies according to their specific needs. They handle all recruitment tasks from job posting to onboarding and help companies concentrate on their business growth. With their expertise and years of experience, they streamline the hiring process and save time and resources for the company.
RMD24 | Debunking the non-endemic revenue myth Marvin Vacquier Droop | First ...BBPMedia1
Marvin neemt je in deze presentatie mee in de voordelen van non-endemic advertising op retail media netwerken. Hij brengt ook de uitdagingen in beeld die de markt op dit moment heeft op het gebied van retail media voor niet-leveranciers.
Retail media wordt gezien als het nieuwe advertising-medium en ook mediabureaus richten massaal retail media-afdelingen op. Merken die niet in de betreffende winkel liggen staan ook nog niet in de rij om op de retail media netwerken te adverteren. Marvin belicht de uitdagingen die er zijn om echt aansluiting te vinden op die markt van non-endemic advertising.
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It is a sample of an interview for a business english class for pre-intermediate and intermediate english students with emphasis on the speking ability.
3.0 Project 2_ Developing My Brand Identity Kit.pptxtanyjahb
A personal brand exploration presentation summarizes an individual's unique qualities and goals, covering strengths, values, passions, and target audience. It helps individuals understand what makes them stand out, their desired image, and how they aim to achieve it.
Memorandum Of Association Constitution of Company.pptseri bangash
www.seribangash.com
A Memorandum of Association (MOA) is a legal document that outlines the fundamental principles and objectives upon which a company operates. It serves as the company's charter or constitution and defines the scope of its activities. Here's a detailed note on the MOA:
Contents of Memorandum of Association:
Name Clause: This clause states the name of the company, which should end with words like "Limited" or "Ltd." for a public limited company and "Private Limited" or "Pvt. Ltd." for a private limited company.
https://seribangash.com/article-of-association-is-legal-doc-of-company/
Registered Office Clause: It specifies the location where the company's registered office is situated. This office is where all official communications and notices are sent.
Objective Clause: This clause delineates the main objectives for which the company is formed. It's important to define these objectives clearly, as the company cannot undertake activities beyond those mentioned in this clause.
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Liability Clause: It outlines the extent of liability of the company's members. In the case of companies limited by shares, the liability of members is limited to the amount unpaid on their shares. For companies limited by guarantee, members' liability is limited to the amount they undertake to contribute if the company is wound up.
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Capital Clause: This clause specifies the authorized capital of the company, i.e., the maximum amount of share capital the company is authorized to issue. It also mentions the division of this capital into shares and their respective nominal value.
Association Clause: It simply states that the subscribers wish to form a company and agree to become members of it, in accordance with the terms of the MOA.
Importance of Memorandum of Association:
Legal Requirement: The MOA is a legal requirement for the formation of a company. It must be filed with the Registrar of Companies during the incorporation process.
Constitutional Document: It serves as the company's constitutional document, defining its scope, powers, and limitations.
Protection of Members: It protects the interests of the company's members by clearly defining the objectives and limiting their liability.
External Communication: It provides clarity to external parties, such as investors, creditors, and regulatory authorities, regarding the company's objectives and powers.
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Binding Authority: The company and its members are bound by the provisions of the MOA. Any action taken beyond its scope may be considered ultra vires (beyond the powers) of the company and therefore void.
Amendment of MOA:
While the MOA lays down the company's fundamental principles, it is not entirely immutable. It can be amended, but only under specific circumstances and in compliance with legal procedures. Amendments typically require shareholder
RMD24 | Retail media: hoe zet je dit in als je geen AH of Unilever bent? Heid...BBPMedia1
Grote partijen zijn al een tijdje onderweg met retail media. Ondertussen worden in dit domein ook de kansen zichtbaar voor andere spelers in de markt. Maar met die kansen ontstaan ook vragen: Zelf retail media worden of erop adverteren? In welke fase van de funnel past het en hoe integreer je het in een mediaplan? Wat is nu precies het verschil met marketplaces en Programmatic ads? In dit half uur beslechten we de dilemma's en krijg je antwoorden op wanneer het voor jou tijd is om de volgende stap te zetten.
India Orthopedic Devices Market: Unlocking Growth Secrets, Trends and Develop...Kumar Satyam
According to TechSci Research report, “India Orthopedic Devices Market -Industry Size, Share, Trends, Competition Forecast & Opportunities, 2030”, the India Orthopedic Devices Market stood at USD 1,280.54 Million in 2024 and is anticipated to grow with a CAGR of 7.84% in the forecast period, 2026-2030F. The India Orthopedic Devices Market is being driven by several factors. The most prominent ones include an increase in the elderly population, who are more prone to orthopedic conditions such as osteoporosis and arthritis. Moreover, the rise in sports injuries and road accidents are also contributing to the demand for orthopedic devices. Advances in technology and the introduction of innovative implants and prosthetics have further propelled the market growth. Additionally, government initiatives aimed at improving healthcare infrastructure and the increasing prevalence of lifestyle diseases have led to an upward trend in orthopedic surgeries, thereby fueling the market demand for these devices.
Cracking the Workplace Discipline Code Main.pptxWorkforce Group
Cultivating and maintaining discipline within teams is a critical differentiator for successful organisations.
Forward-thinking leaders and business managers understand the impact that discipline has on organisational success. A disciplined workforce operates with clarity, focus, and a shared understanding of expectations, ultimately driving better results, optimising productivity, and facilitating seamless collaboration.
Although discipline is not a one-size-fits-all approach, it can help create a work environment that encourages personal growth and accountability rather than solely relying on punitive measures.
In this deck, you will learn the significance of workplace discipline for organisational success. You’ll also learn
• Four (4) workplace discipline methods you should consider
• The best and most practical approach to implementing workplace discipline.
• Three (3) key tips to maintain a disciplined workplace.
2. Table of Contents
The Challenge................................................................................................................................ 3
A Multifunctional Process............................................................................................................. 4
Physical............................................................................................................................................ 4
Planning .......................................................................................................................................... 4
Optimization..................................................................................................................................... 5
Making Better Use of Big Data.................................................................................................... 6
Analyzing and Forecasting Tools Gain Strength ........................................................................ 6
Analysis............................................................................................................................................ 6
Forecasting....................................................................................................................................... 7
Management.................................................................................................................................... 7
Optimized Inventory Levels Based Upon Better Decisions....................................................... 7
Conclusion..................................................................................................................................... 8
References..................................................................................................................................... 9
2
Better Inventory Management
3. The Challenge
Because inventory is usually one of the biggest numbers on their balance sheet, effective inventory
control and management is a vital function to help insure the continued success of distribution and
manufacturing and companies. The effectiveness of inventory control is typically measured by how
successful a company is at reducing inventory investment, meeting its customer service goals, and
achieving maximum throughput and cost containment.
On paper, the concept of inventory management seems easy enough. In simple terms, it can be
summed up as the process of determining what items to stock, how many of each item should be
kept on hand, and when orders should be placed for more.
Unfortunately, inventory management is much more complex in practice. The factors that
complicate the process fall into two broad categories: 1) conflicting objectives across various
segments of each company, and 2) the tentative nature of both supply and demand.
In the case of conflicting objectives, some parts of a business seek to increase inventory and other
parts to decrease it. For example, because the sales department prioritizes the delivery of products
in the best time frame to satisfy customer demand, they encourage the business to keep finished
goods stocks high. The purchasing department achieves volume discounts on large batch and
off-season purchases, and this increases inventory. Production wants all parts and raw materials
to be available to keep line efficiency high and run large batch sizes, again increasing inventory.
Conversely, product developers and finance department trend watchers often want to keep
inventory low to advance the roll-out of new products. And most importantly, senior management
wants to decrease inventory, because sitting on stock ties up cash flow. Each part of the company
has the same goal—better profitability—but differing viewpoints on how to get there.
In the case of supply and demand, difficulties stem from unpredictability. For instance, unsteady
supplier performance, supply chain disruptions, scarcity of materials, the perishability and
obsolescence of products, and shrinkage contribute to the need to establish buffer stocking levels
to provide safety days of lead-time supply. On the demand side, the overall economic environment,
new products and innovations, and high-traffic sales volume for some items and sporadic or
seasonal sales traffic for others necessitate the institution of a mixed approach to item-by-item
stocking levels.
For distributors and manufacturers, the above factors are complicated further when hundreds of
thousands of finished goods for sale or thousands of parts for assembly are warehoused across
multiple locations.
Yet with all of these complications to consider, inventory control and management still fundamentally
amounts to walking a fine line between meeting customer needs and stocking the least amount of
inventory possible. Because inventory is the lifeblood of the sales and production processes, it’s
important to stock enough of it to avoid paying the opportunity costs of lost sales and diminished
3
Better Inventory Management
4. customer satisfaction and loyalty. But because inventory is expensive, it’s important to stock leaner
quantities of it to avoid paying carrying costs like taxes, insurance, security, and storage and to
avoid paying the opportunity cost of unavailable working capital.
To repeat, inventory is generally one of the biggest assets on a company balance sheet.
Unsurprisingly, recent research strongly suggests that inventory management is an area where
distributors and manufacturers are aggressively targeting improvement. For example, in a 2012
survey of supply chain professionals conducted by the Aberdeen Research Group, 60% of
respondents cited reducing inventory costs as a top priority, and 42% cited improving customer
service levels as a top priority.
A Multifunctional Process
Any discussion of better inventory control and management practices begins with an overview of
the process. It helps to remember that effective inventory control and management is rooted in three
distinct but interconnected processes.
Physical
Physical inventory control is a term that describes the receiving, movement, stocking, and overall
physical control of inventories. In mid-market and larger companies, this component of inventory
management is virtually ongoing, with shipments arriving and departing many times each day. Barcoding stock keeping units (SKUs), consigning, and kit repackaging are notable aspects of physical
inventory control.
Another daily responsibility of physical control is data entry. All items that enter or leave the inventory
system must be tracked in the company’s ERP system and all paperwork pertaining to these
movements should be filled out daily as well. Accurate and timely inventory data collection is an
imperative.
To further assure and enhance accuracy, inventory specialists follow a strict schedule of cycle
counting or perpetual physical inventory (PPI). This manual intervention serves to check and verify
that the computerized data records for quantity and location match the physical stock. PPI provides
information on the effectiveness of control practices over time, allowing targets to be set, adjusted
and monitored.
Planning
Whereas physical inventory emphasizes control and movement, inventory planning emphasizes
systematic management. Inventory planning and ordering relies upon various methodologies that in
turn depend upon varying rates of demand. Thus companies commonly utilize material requirements
planning (MRP) in high sales volume scenarios or kanban in a lean, just-in-time (JIT) environment.
4
Better Inventory Management
5. Briefly, MRP systems facilitate the right-sizing of inventory that gets turned over reliably and
replenished frequently. Right-sizing means avoiding stock-outs and lost sales of high-demand items,
while also avoiding trapping working capital in overages of pricey stock.
JIT systems base purchases of new stock upon customer demand as it happens bit by bit. For
instance, companies that sell or assemble only one or two particularly large items per year don’t
need to have those expensive items (or the parts the items are composed of) sitting around waiting
for a buyer.
Significantly, in both high- and low-volume situations, data drives the stocking of inventory, and the
accuracy of the data is driven by conscientious data entry. Whether stock is ordered for regular
arrival by the truckload or by irregular special deliveries, systematic, preplanned approaches to
replenishing inventory involve information relevant to sales, finance, purchasing, possibly production,
and shipping and receiving. The interplay of this information through an ERP system undergirds
greater efficiency.
Optimization
Nonetheless, despite the best efforts to effectively plan inventory ordering, stock-outs and stock
overages happen. The statistics describing the top priorities of inventory specialists cited above
illustrate that fact. The frequent occurrence of stock-outs and stock overages indicate that inventory
levels have not been optimized.
Enter the inventory optimization system. These emerging technologies are the supply chain
management mechanism used to mathematically calculate where and when inventory should be
deployed to satisfy predetermined management objectives. They’re designed to better classify
stocking levels (buffer, replenishment, overage) based upon an analysis of past demand, augment
supplier management based upon past supplier performance, and improve demand forecasting
going forward.
The latter function has the greatest ramifications for optimizing inventory levels. Stock-outs and
stock overages, after all, stem from a mismatch between the stock a company has on hand and the
actual demand for it. Obviously, inventory specialists cannot eliminate those mismatches entirely.
However, the advent of new inventory optimization technology holds the promise of reducing
those mismatches significantly by forecasting demand more accurately and with much greater
speed, thereby putting the predetermined management objectives—again, measurable reductions
in inventory investment, increased customer satisfaction, maximized throughput, and cost
containment—well within reach.
5
Better Inventory Management
6. Making Better Use of Big Data
It’s well worth highlighting the fact that the new inventory optimization tools possess the capacities
they do because recent technological developments have focused on improving the ways in which
the power of big data is harnessed.
As alluded to above, Internet, mobile, and software technologies have enabled businesses to
amass and continuously expand gigantic datasets within their ERP systems. That data has been
used to prepare tax returns and financial statements and improve productivity through information
sharing within and outside of an enterprise to facilitate communication and collaboration between
stakeholders.
ERP solutions have also provided new and improved ways to manipulate the data within customized
financial reports that offer the potential for deep insight into customer behavior, operational trends,
and ways to change to more efficient business models. The concept has always been about
the ability of a company to use the massive amounts of data generated to become more agile
and responsive—and ERP systems have advanced steadily to help them do that. Still, the size
of the ever-accumulating datasets consistently outpaced the ability of technology to realize the
full potential of the intelligence within all that data. For example, ERP systems house plenty of
data related to inventory, but most of them do little beyond tracking the amounts of inventory on
hand and alerting management about levels that are running low. However, as the latest inventory
optimization systems demonstrate, today’s technology is catching up with all that data and doing
more with it.
Now recall the fine line that the inventory specialist walks: balancing having enough stock to meet
customer demand with as little inventory as possible. Recall, too, the complex organizational needs
and the fluctuations of supply and demand. Then multiply the complexities over millions of SKUs,
thousands of global supply chains, and far-flung warehouses. Because so many factors have real
and potential impacts on inventory levels, modern inventory optimization systems are engineered to
exploit data generated from everywhere within an ERP system.
Analyzing and Forecasting Tools Gain Strength
Take, for example, longitudinal sales, purchasing, financial, supplier, and production data. Most
ERP systems make it possible to produce reports using each dataset complete with helpful charts
designed to compare results against industry wide key performance indicators over time. Business
managers resolve problems, build on successes, and fine-tune best practices and decision making
based upon reports like these.
Analysis
Integrating an inventory optimization tool with the existing ERP system allows inventory specialists
to take the data analysis functionality much further. Employing proprietary algorithms, the best such
optimization systems provide a graphical interface capable of illustrating a synthesis of the data from
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7. all five of the above departments. Such a synthesis would analyze, diagnose, and identify seasonal
shifts in item-by-item demand, patterns for large customer orders, when stock-outs and overages
were likely to occur, lost sales, excess orders, items that are moving slowly enough to warrant draw
downs, unsellable items in need of disposal, patterns of price reductions and volume discounts from
suppliers, patterns of suboptimal and optimal performance by suppliers, patterns of production line
downtime, concomitant periods of strained overall organizational cash flow . . . and more.
Forecasting
An inventory optimization tool then uses this analysis of cross-functional big data to forecast
demand more accurately and much faster than previously possible. This enables the system to
recommend optimal inventory levels for sales availability, taking into account risks of stock-outs
and overages and to provide inventory specialists with advance warnings about stock levels
approaching numbers that are too high or too low.
Management
The inventory optimization tool also makes recommendations about optimal restocking schedules,
and it can provide unit-level thresholds for automated ordering and replenishment. A key feature
of the system is its capacity to recognize exceptions and alert management when mitigation is
necessitated. And because the inventory optimization tool is integrated with an existing ERP
system, the recommended stock levels, replenishment schedules, automated orders, and exception
alerts are communicated cross-functionally and to stakeholders outside the organization. Thus, an
optimization tool uses actionable intelligence.
Optimized Inventory Levels Based Upon
Better Decisions
Ultimately, inventory optimization depends upon decisions made by inventory specialists and senior
management based upon several considerations unique to their companies. Using sophisticated
tools to make those decisions helps management more accurately balance the trade-offs between
the costs of a stock-out versus the costs of overstocking.
That means the capacity of the inventory management tool to adjust recommended stocking levels
dependent upon variable risk tolerance comes into focus. For instance, analysis of sales data may
reveal that per unit profit far exceeds the investment in inventory, a disproportionate reliance upon
repeat and/or particularly high-volume clients, or that each sale opens additional revenue streams.
These factors would compel management to push their risk tolerance in the direction of avoiding
stock-outs, and thus having more inventory at the ready.
Conversely, some companies stock costly and/or perishable items, which are expensive to store
and maintain, or sell to customers with limited alternatives to turn to. Furthermore, economic
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8. conditions may dictate that a company must generate working capital from every possible source,
a situation that certainly pertains in today’s competitive environment. These factors would push
management to stock as little inventory as possible to avoid the storage costs.
Of course the reality is that mid-market and larger distributors and manufacturers commonly stock
a mix of inventory that falls into both rubrics with varying levels of overlap. This means they need to
push multiple turns of high volume items and pull lean inventory of items that move less frequently
and everything in between. As a result, the ability of an inventory optimization tool to adjust
forecasts based on “what-if” parameters is a huge plus to management.
Again, the responsibility of inventory management is to make better decisions that result in a better
balance of trade-offs, depending on shifting goals influenced by events on the ground. When
innovative and sophisticated tools become available to help them improve that balance, those tools
can provide a large and ongoing return on investment. If a distributor has typically carried $60 million
worth of inventory and utilized an inventory optimization tool to reduce that level of inventory by 5
percent while maintaining customer satisfaction, that company has added $3 million of working
capital to the balance sheet. Some companies look to reduce inventory much further. According to
a recent WSJ.com report, “The best supply organizations deploy sophisticated analytical tools to
reduce inventory levels by 20 percent to 50 percent, resulting in savings for years.”
In Conclusion
Despite right-sizing inventory’s being a complex challenge, the emphases placed by senior
management on cost control and customer satisfaction are driving the adoption of more
sophisticated systems of inventory management.
As it stands, stocking too much inventory and suboptimal customer service are very common, yet
often unnecessary. There are proven technologies that can help management project customer
demand more accurately and calculate the optimal inventory levels needed to balance the
benefits of meeting uniquely defined levels of customer service with the benefits of stocking as
little inventory as possible. These emerging technologies take in big data to account for complex
and vast networks of cross-disciplinary needs, product and service mixes, and fluctuating supply
and demand matrices. Furthermore, using the right techniques for sales forecasting and inventory
management allows inventory specialists to monitor changes and initiate cross-functional responses
to alerts when action needs to be taken.
By utilizing new, flexible, and more refined tools that provide for dynamic optimization of inventories
to maximize customer service, throughput, and market share, while decreasing inventory investment
and lowering costs, inventory managers can significantly impact overall competitiveness and
profitability.
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9. References
1. The First Steps to Inventory Management. Geoff Relph, Witek Brzeski and Gail Broadbear.
InventoryMatters.com, (originally) December 2002—January 2003.
2. Inventory Control: How Best-in-Class Stack Up on Customer Service While Optimizing Their
Inventory. Matt Ball. Aberdeen Group, March 2012.
3. Distributors Put inventory Under the Microscope. MDM Staff Writers. Modern Distribution
Management, June 25, 2012.
4. Ten Ways to Improve Inventory Management. Pratap Mukharji, Sam Israelit, Francois Faelli,
Thierry Catfolis and Raymond Tsang. WSJ.com, July 6, 2011.
5. Supply Chain Efficiency through Collaboration. Dale Ross and Jerry Forsythe. Logistics
Quarterly, Winter 2002.
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