Tag Archive for: Inventory Optimization

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Expert Investment Buying Tips for your Optimized Inventory Replenishment

Inventory Investment Buying (forward buying) is a strategic part of the buying role that many companies don’t realize today. The truth: Investment Buying that is based on accurate demand forecasting and effective inventory optimization processes delivers significantly higher gross margins, better GMROI, and balanced inventory levels.
Buying and maintaining inventory is often viewed as a cost center and companies struggle with these 4 basic questions:

  • When do I buy?
  • What quantity should I buy?
  • When I buy, how can I balance inventory levels?
  • A vendor has offered a discount, how much more, if any, should I buy?
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Why Lead Time impacts your Inventory Optimization and How To Fix It

What is Lead Time? Why Is it Important?

Lead Time is the length of days between when an order is placed and the date the goods are available for use. The largest impact to lead time accuracy is found by comparing the expected receipt date to the actual receipt date for each purchase order. In simple terms, the variance is calculated as the absolute value of the difference [expected or requested receipt date – actual receipt date] for each line on the purchase order. These variances in days across multiple purchase orders establish the need for lead time accuracy testing and lead time forecasting.

What is the Impact When Supplier Lead Time is Not Accurate?

Suppliers provide an estimate of lead time, but these numbers are not always accurate. The differences between your expected receipt date and the actual receipt date can become expensive from the resulting unplanned overstocks, out of stocks, and deflated consumer opinions. Lead time tracking and lead time forecasting are mission-critical to the success of your supply chain. Lead Time Forecasting, like Demand Forecasting, should use a set of math algorithms to calculate the correct lead time days to use in planning purchase orders. Also, like Demand Forecasting, the Lead Time Forecast should move up and down according to changes in the market, business influences, and seasonality of the product.
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Inventory Optimization and Supply Chain Visibility: Top 5 Blogs of 2012

Hottest Topics of 2012: Inventory Optimization and Supply Chain Visibility

Inventory Optimization and Supply Chain Visibility are the top interest blogs (stories) from 2012. Based on the number of blog viewers and average time each viewer spent on each page, the following five blogs are 3-1 favorites from 2012. These blogs indicate the key areas that companies want to improve in 2013.

Inventory Optimization is critical to Success

Inventory Optimization (IO) is a goal that often delivers substantially more profits at reduced operating expenses. The math and processes are too complicated for Excel and often software companies use IO as buzzwords and not deliverables. The reality is IO provides great promise in a world where supply chains are getting more and more complex and logistics is getting faster and more efficient.
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Little Known Leverage Strategies for Lost Sales Reductions – Part 3

Leverage Your Lost Sales Data to Grow Profits

The key to successful Demand Driven retail is leveraging the right data in the right places. Lost Sales data has a lot of leverage that, when ignored, can be your demise; however, those that successfully measure and leverage Lost Sales data will see sales and profit gains. Our Lost Sales blog today outlines how lost sales data can be used to improve inventory optimization and highlights how all the pieces are interconnected. We also dive into the differences between lost opportunity and lost sales, the differences and impacts between the two, and close with some sobering statistics from Lost Sales data collected from the industry.

Our first blog on Lost Sales highlighted the staggering impact of Lost Sales in most businesses today. We outlined some of the methods used to calculate lost sales, and why these methods do not deliver value. Our second Lost Sales blog reviewed how lost sales can add value to demand forecasting and improve the accuracy and value for the service attained calculation.
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Truth, Lies, and Strategies for Lost Sales – Part 2

Why Lost Sales are Ignored

Our last blog highlighted the staggering impact of Lost Sales in most businesses. We outlined some of the methods used to calculate lost sales, and why these methods do not deliver value. We touched on in-stock and Service Attained as two measures that in the past were acceptable inventory ROI measures but, in the market place today, these methods are dated and focus retail in the wrong direction.

With the advancement of inexpensive hardware, we can calculate a very accurate demand forecast across any block of products in our assortment and measure the business at any individual (or group of) product / locations. We can easily track available inventory for any product/location at a moment’s notice. This makes calculating lost sales a simple calculation: sum demand for the days where available inventory <=0. Today, we will review how lost sales impact demand forecasting, service attained, and inventory optimization.
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Inventory Optimization: Putting it in to Practice

We’re wrapping up an informative series on inventory optimization today: we’d like to give you some advice on actually putting it all in to practice. If you haven’t been with us throughout the month, the series has included:

What’s the Payoff?

What are the aims of Inventory Optimization? We argue that Inventory Optimization aims to improve your margins through a net reduction of acquisition and carrying costs. So what does this look like?

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The 3 Most Ignored (and Profitable) Factors in Inventory Optimization

When is the last time your Inventory Optimization (IO) program saw the inside of a warehouse, the bed of a truck, or a container floating across the ocean? Most inventory optimization programs overlook the harsh realities of replenishment and logistics. How does your program stack up?

Note: We’re in week four of our series on inventory optimization.

Oft-Overlooked Inventory Optimization Factors

While it’s true that inventory optimization is largely a math equation, the devil (and the profit) is in the details. Most solutions talk about carry cost, acquisition cost, and profits because it sounds good and seems impressive, but what is really happening under the hood of your IO solution? Read more

Carrying Cost: Clean up your Inventory Optimization Fuzzy Math

Inventory optimization is based upon two major components: acquisition cost and carrying cost. If either of these factors is inaccurate, then you could be leaving money on the table. An accurate carrying cost calculation can be the difference between a highly profitable inventory optimization program and one that forces you to close your doors.

Carrying Cost Mistakes: Inventory Optimization Killers

So you’ve implemented a highly successful PO tracking program, and you know your acquisition cost for each product and location down to the cent (kudos if you’ve read our latest blog on acquisition cost). Now what?

While many top retailers (or grocers, or wholesalers) may include many of the following factors in their carrying cost calculations, we’ve found that most businesses overly simplify their projections, losing valuable margin in the process. We’ve also found out that calculations often leave out real world restrictions including: Read more

Inventory Optimization: Is Your Acquisition Cost Off-Balance?

Inventory Optimization – Do you know your Acquisition Cost

In today’s tight economy, retailers like you are constantly looking for the best and most profitable ways to grow their business. Last week, we talked about inventory optimization and how a truly optimized inventory results in lower inventory and higher profits by managing a balancing act of acquisition cost, carrying cost, vendor minimums, price breaks, gross margin, sales dollars and service goals. This week we take a closer look at acquisition cost and the role it plays in the balancing act of inventory optimization.

Acquisition Cost and Demand Forecasting

I spend a lot of time with retailers, and every executive I meet is interested in accelerating their sales growth while improving their distribution capability at the same time. One often overlooked piece of the puzzle is managing the Acquisition Cost.
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Has Inventory Optimization Left you Out-of-Stock and Over-Stocked?

Inventory Optimization doesn’t mean Out-of-Stock or Over-Stock

Just last week, I was talking with a retailer who wanted to know how his optimized inventory resulted in overstock and out-of-stock at the same time. I hear this question all the time and the answer is simple. They don’t have a true demand driven optimized inventory because either they don’t have an inventory optimization solution or their solution isn’t really optimizing their inventory.

Inventory Optimization needs accurate Demand Forecasting

Many times if we optimize one thing it is to the detriment of something else. However, for successful inventory optimization you need a demand forecasting and inventory replenishment solution that can optimize your inventory across the supply chain. This means lead time forecasting; DC to DC transfers, DC days processing, internal transfers, the entire pipeline from Purchase Order to consumer purchase must be considered in the review process. Inventory Optimization should increase your profits by calculating the most economical way for you to flow inventory (EOQ) and minimize costs.

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