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Inventory ties up working capital which could be better employed elsewhere. But it is necessary as a buffer against demand and lead time volatility.
Good practice in inventory management starts with understanding your product range:
- Product lifecycle stages (new, growth, maturity, decline, obsolescence)
- Predictable demand variation (growth / decline, seasonality, promotional activity)
- Unpredictable demand variation (volatility)
- Contribution to turnover and profit
- Contribution to strategic objectives
- What level of availability is acceptable to the business and its customers?
We can analyse your product range and work with your team to achieve this understanding..
Our inventory optimisation consultants will then:
- Suggest appropriate strategies to manage each range segment
- Uncover the drivers of excess inventory (e.g. erroneous system parameters, inappropriate order quantities, long lead times, obsolescence) and provide an action plan to address these
- Model safety stock and service level options, and provide system parameters to achieve the desired trade offs
- Map the whole supply chain to reveal and eliminate unnecessary duplication of inventory, suggest alternative ways of working with suppliers
The directors of Go Supply Chain have a proven track record of helping companies to understand and address their inventory situation.
Our inventory optimisation modelling can help get inventory cover to the right levels across the range – often this results in reduced inventory value while customer service levels improve.
Inventory optimisation considerations
- Can we improve customer service by holding the right amount of each product?
- Can we reduce inventory and still hit our availability targets?
- How should we classify products and set availability targets?
- How much working capital can we release by optimising inventory?
- Should we use a faster or slower inbound freight route?
- Which products should we hold in stock in which locations?
- Can we cross-dock some products and hold no stock?
- How can we work together with suppliers to minimise inventory?
- What if we use a different freight service and the lead time changes?
- Holding too much inventory and still not achieving availability targets
- Frequent stock outs impacting on customer service
- Losing customers to rivals due to stock outs or uncompetitive costs
- Tying up working capital and incurring financing costs
- Saving money on freight but spending it on warehousing and finance
- Increasing shrinkage, damage and obsolescence
- Suffering price erosion as excess stock ages