Inventory Planning Blog

The Part One of Inventory Forecasting covered an overview to inventory forecasting and the techniques available. This post continues to review the approaches to inventory forecasting.

This blog post provides some basic information about viable inventory forecasting techniques. Forecasting is one of the key steps in inventory planning but not the only one. There are other key variables and processes that come into play in good supply chain replenishment planning including inventory rationalization and optimization.

Complexity around the world due to social, medical and confrontational disruption seems to be the new norm. Serious viral infections have been on the rise for many years and will be with us forever. Now, is the time to advance the state of your inventory planning by incorporating solutions based on scientific inventory optimization algorithms.

Recently, Valogix and business partner DSI Global announced their 2020 expert Series Webinar program. The goal is to provide companies with specific information from leading industry experts to help improve their supply chain performance.

COVID-19 is presenting a challenge we have never experienced before. Supply chains across the globe have been upended. Companies are struggling to make sense of their inventory demand forecasting and stock replenishment planning.  Cases range from plummeting sales to unprecedented peak sales and to longer lead times, to unavailable stock. This may become the new normal. 

Your company has a mission to be the best supplier of your products on the market today. Most companies define what that means in terms of serving the customer. For example, your customers can send you an order and get a return confirmation promptly. You will ship all orders within 24 hours. You will offer a variety of products that is both broad and deep. All great goals to build and grow a business. Now, you go out and spend a ton of money on the inventory. To buy smart, you use economic ordered quantities (EOQ) and take advantage of your vendor’s special deals.

New inventory planning technologies and the Cloud can provide just the right environment for better global planning.

As the New Year begins, today’s challenging business climate is forcing managers to look for simple, yet effective ways to reduce waste and improve productivity to increase profitability and service. Finished goods, production materials and service parts inventory planning are prime candidates. With thousands of items to manage, sometimes at multiple locations, the lack of scientific automated tools has made the job almost impossible leaving companies with too many of the wrong items and not enough of the critical ones. The result is unnecessary inventory expense, while suffering service-limiting stock-outs.

Organizations with large inventory operations work with multiple levels of supply. Central sites purchase and stock most of the items.  Slow-moving and less important items can be sent quickly to remote sites when needed, while fast-moving items are stored closer to the customer to enable more rapid customer service.

SAP Business One inventory management software offers inventory management, manufacturing, and purchasing capabilities that can help improve supply chain management. Now, available with multiple location capabilities it offers more for growing companies.

There are a lot of inventory planning solutions from all around the world. Many are designed for large enterprise companies. They cost hundreds of thousands of dollars and are highly complex. Some are so complex a math or science degree is required just to operate the system. Others, at the low end, may only be point solutions for forecasting, as an example, or offer individual modules you need to buy separately. Several of these solutions include a forecasting capability either their own platform or from an included third-party provider. Most have you select the appropriate forecast method and require you to manually set replenishment levels, like min & max. How is this any better than using a spreadsheet?

How many offer real inventory optimization and why is this important? There are many reasons why inventory optimization is critical for conducting business in today’s ever challenging economic and consumer-oriented climate. An advanced supply chain planning system should also rationalize the inventory levels and investment in light of the expected demand and other variable conditions.

First, what is the cost of carrying, holding and managing an inventory?  The costs for most items are steadily increasing, real estate costs and taxes are up and shipping costs are through the roof. Inventory optimization provides a great balanced inventory to meet expected demand, while reducing costs and better controlling spend for additional stock purchases. Planning in a timelier manner reduces the need for expediting orders in from vendors, which in-turn reduces the need for expediting shipments to customers.

Second, inventory optimization dramatically improves the financial performance of an inventory because buying and stocking are more in-line with expected customer demand. It helps to reduce and almost eliminate the future build-up of excess inventory and dead stock.

Third, there are too many known and unknown variables that can affect your inventory and subsequent customer service levels to manage properly. Just forecasting and planning your inventory leaves you wide-open to problems in meeting both your financial goals and customer expectations.

When purchasing items for your business, you need to properly assess the value of what you are buying.

What is your position about planning in the Cloud? What are your competitors doing or likely to do? Are they staying the course on-premise or are they adopting new methods and technologies to improve their business performance? Are they already in the Cloud

Previously, we discussed the different industries, uses and planning of parts. Today, the OEM replacement of parts is happening at an ever-increasing rate as technology allows for improvements in performance and longevity.
The graphic below shows the important milestones in a part’s life cycle. These have an impact on inventory planning for each item. This section examines how those milestones impact parts planning.

Inventory planning for aftermarket and OEM parts require appropriate skill sets and knowledge of the industry, markets and the customers. Advanced inventory planning software is critical to successful manage parts and meet tough customer demands and timing.