Inventory Planning Blog

Inventory Optimization is Key to Freeing Up Your Cash - Here's How

Posted on Mon, Mar 11,2013@09:01 AM

Procrastination is Costing You More Than You Think

inventory optimization, ValogixInvesting in smart inventory solutions that improve your planning is an important business decision. Sometimes the concept of spending money to save money is very hard to accept. There are no guarantees the investment will pay off, so there is some level of risk involved. But, is it any riskier to do nothing? To maintain the status quo? Yes and even more so as you risk losing customers and possibly your business.

We know you work hard every day. You may have other software or IT projects planned. You may think your inventory is under control, but can you be sure?  You may be waiting for the economy to improve. It’s now been 2 ½ years since the downturn how much longer can you afford to wait?

By putting off using advanced inventory planning and optimization solutions, you are missing out on the opportunity to free up CASH. Cash right now, that’s at hand sitting in your inventory. As an example, based on an inventory value of $1,000,000 and an average inventory reduction and productivity gains of approximately 20% - 30%, as much as $200,000 to $300,000 in positive cash flow can be realized.  That is anywhere from $16,666 to $25,000 per month.

inventory optimization, ValogixIf your inventory investment is $5,000,000 a 20% reduction means a $1,000,000 savings. When you calculate the monthly savings it equates to 19% of the total inventory reduction. This is a combination of reduced cost of money, insurance, warehouse cost, personnel, etc. That’s $15,833 every month and in the first year adds almost $190,000 to your bottom line.

Advanced inventory planning and optimization software not only automates the entire planning process, it dramatically increases the positive cash flow of a company. By smartly reducing inventory investment, reducing stockouts, decreasing expedited shipping costs, and reducing planning time all contribute to more available cash. Add to that increased sales and productivity and the gains will also lead to an improved competitive advantage.

Managing your inventory manually can be not only time consuming but error prone as well. The challenges resulting from this inefficient process can be:

  • Poor ability to recognizing “Demand variability”
  • Difficulty in setting and maintaining accurate stocking levels
  • Dealing with critical “Stock-outs”
  • Low inventory turns
  • Increase in excess and obsolete inventory
  • Inability to easily forecast more accurately
  • Wrong mix of available items  
  • Added complexity in determining how much to order, when to order, and where to stock

Waiting costs you thousands of dollars every day, disrupts your business and antagonizes customers and employees.  Review some of the customer case studies which clearly demonstrate the power of advanced planning and optimization.

Why wait?  It doesn’t get any easier or better than this.

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Tags: inventory optimization, Valogix