Should a business really concern itself with forecasting and managing its inventory levels? After all, having a high inventory means it can respond easily to customer demand spikes and inconsistant lead times. Isn't that good? Is there any cost associated with carrying that inventory - after all, it is just warehouse space, isn't it? And, the inventory invenstment dollars show as an asset on the balance sheet - sounds like the more the better! The warehouse operations can just run on the most efficient method and it is up to the Sales to find customers for the product-right?
First, the average annual cost of carrying CPG inventory is about 25% of the average value of the inventory. This includes cycle count costs, space costs, and personnel to manage it. Oh, and let's not forget taxes, shrinkage, depreciation, insurance, and the cost of capital. Also, while finished goods are counted as an asset, that asset isn't worth any cash to the business until sold. And Sales often has good reasons why all the finished product can't be sold, such as cyclical demand, economic changes, and customers going out of business.
Is it really that difficult to caluclate a demand forecast? Actually, calculating a forecast based on the historical demand is not that difficult and is not the only factor to be considered in determining an optimized inventory level. Other factotrs such as service level, demand deviation, lead time deviation, order cycle, buying multiple, satey stock, and EOQ are just as import and can significantly impact the final result.
What if there was a company that, by using advanced demand forecasting and data analytics tools, could help companies manage their inventory to maintain or increase service level and increase inventory turns and avoid the other issues with inventory? That company is Anseris, Inc.
We will assist you to determine the target customer service levels by individual SKU or at the aggregate level based on your objectives. Your optimal safety stock is automatically calculated for every item in every location and is dynamically adjusted based on current demand. Lead-time performance is tracked at the SKU level with advanced forecasting tools. We use supplier order frequency simulations and order building logic to find the optimum replenishment order cycles. When your buyers find a deal, we'll maximize the profit by finding the right amount and time to purchase. Their productivity increases due to fewer forecast exceptions, automated replenishment, and exception based workflow. Our tools help your sales with proven forecasting techniques that manage projected demand and track demand by the day of week and seasonal demand patterns.
What are the results to you? Actual results from customers include: inventory turns increase up to 50%, service levels are up by 10%, working capital is released, buy-side profit margin increase up to 400%, and buyer productivity ramps up to 100%.
We help you become a better and more profitable company. Contact us today to get started. Can you afford to wait?