Achieving and maintaining inventory optimisation is often complicated, but technology tools, automated processes and software packages can overcome these challenges. Continual inventory management optimisation may reduce stock-outs, safety stock funds, surplus write-offs and administrative costs with the right software. Here are four transformation business practices that will reap substantial rewards.
Economic Modeling
These capabilities offer warehouse management the opportunity to explore “what-if” scenarios and inventory trade-off decisions. Economic modelling may help improve understanding and control of emergency freight, critical stock-out, inventory holding and total replenishment costs for different types of items and purchasing methods. Economic modelling is often used to compare existing metrics and optimized results for inventory value, turnover, service level and annual costs.
Reordering Parameters
Reordering parameters, or the MIN/MAX levels, are often used by ERP or WMS programs to generate replenishment orders. This means that they are one of the driving forces behind inventory outcomes. Reordering parameters should be periodically audited and optimised to reflect changes in usage, criticality and lead time. This optimisation process may involve the selection of appropriate algorithms, the use of inventory performance data and the analysis of grouped items rather than one-by-one evaluations.
Demand Forecasting
Warehouse leaders should prepare for increases in demand for certain inventory items. A WMS will help to select the appropriate algorithms for general inventory and each stock item. A WMS should use filtering tools and statistical distributions that are appropriate for a wide range items. Advanced WMS systems may come with predictive analytics capabilities, so they can use historical trends to project future events or demand profiles.
Lead Time Forecasting
This is one of the key factors in determining optimal safety stock levels. A WMS will be able to forecast the average lead time through receipts and purchase order histories. They will then apply filtering techniques to eliminate abnormal data and produce accurate forecasts. Once warehouse managers have calculated lead time variance, they may use it to estimate expected service levels and time frames.
Exception management ensures that inventory reviews focus on problematic and high-value products. A WMS’ exception management tools may allow management to define exception conditions, alert thresholds and reordering parameters. Contact us to learn how our solutions will epitomize your inventory management system.
