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Inventory Optimization

Data Profits > Solutions > Inventory Optimization
Why does ordering weekly never deliver 52 turns, reach the service goal, or grow the business?

Acquisition costs from a weekly order cycle can absorb profits. Overstock from unbalanced orders, bumped up to meet vendor minimums, can erase what’s left of your profit. Your forecast accuracy must be perfect when ordering weekly, or you will have lost sales. The combination of inaccurate forecast and overstocks will create the ‘bullwhip effect’ eating away your GMROI and inventory profits.

We optimize the order cycle by considering acquisition cost, admin fees, carrying cost, service goal, lost sales, vendor minimums, days of week to order, bracket pricing, shelf life, unit of measure variations ($,#,container, trucks, etc.), safety stock, lead time, multi-echelon dynamics (X-dock, direct, DC-Store) and product/location sales forecast over time (seasonality).

Are you tired of doing the same thing each week and getting the same results? Then Data Profits’ Inventory Optimization can help, providing you with the right way to grow profits.

Demand Forecasting

How does Data Profits evaluate cost of goods sold (COGS)?
True COGS is based upon a host of factors that include materials cost, acquisition cost and holding cost.

Acquisition Cost
Acquisition cost of inventory includes those costs – minus discounts and returns – that are incurred to bring the inventory to a sellable condition. Examples might include

True COGS is based upon a host of factors that include materials cost, acquisition cost and holding cost.Acquisition Cost Acquisition cost of inventory includes those costs – minus discounts and returns – that are incurred to bring the inventory to a sellable condition. Examples might include cost to move the inventory to the selling location and costs to unpack and price.

Holding Cost
Carrying cost of inventory includes those costs incurred over a period of time to hold and store inventory. Examples might include depreciation, taxes, insurance, employee cost, building storage, opportunity cost, and cost of capital.

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Inventory Optimization with Vendor Minimum

Each vendor is different. Some will ship any day, others on certain days only. Vendors may require a minimum order based on one or multiple requirements like dollars total and rounded to pallet quantity. Minimums might include:

  1. Unit of Measure requirements:
    • Full Truck
    • Cube for a container
    • Dollars
    • Units
  2. Some vendors only allow orders one day a week. Some vendors will only ship to a location on a specfic day of the month. Those days between have a carrying cost you incur.
  3. Our charts and grids display a time line and identify how many selling days are needed to reach a vendor minimum order point.

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Inventory Optimization - Top 2 Metrics

Inventory Optimization with Multi-Tier (Bracket) Pricing

Bulk buying for a price discount makes sense right?

Data Profits’ Inventory Optimization module is the wake up call to how your business buys into a deal and bulk buy discounts. Get a real picture of the deal:

  1. Buying a whole truck gives a better price than buying a 1/2 truck; but the additional days of inventory carrying cost buckled with an end of season sales slow down can derail any profits.
  2. Does a 10% discount for buying goods 3 months early increase your profits or will the additional carrying costs wipe out your success story?
  3. iKIS provides a display chart for each price bracket. You can see the different price points and their effect on order cycle and profit to help you identify which price bracket provides you the best return.

Inventory Optimization with Shelf Life

Good things do not last forever. Some products left on the shelf too long force you to trash the inventory, lose consumer goodwill and any profits.Data Profits Order Inventory Optimization program understands the importance of shelf life in the product life-cycle. Too many days on the shelf for some products spell doom to your bottom line:

  1. A forward buy deal sounds good when you hear the price. Do the additional days inventory you carry make sense with your current pipeline? Just because it sounds good doesn’t mean you will make money.
  2. Do you need an order this week? How many days supply are in your pipeline (available + on-order)? Does your pipeline report highlight any potential shelf life opportunities?