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HOW TO MODIFY A SYSTEM TO MAXIMIZE INVENTORY-BASED SERVICE AND ROI

Distributors who are using inventory management software that can be modified may want to change it in ways that reduce excess inventory, without hurting customer service; and reduce shortages. Other benefits of these changes include reduced purchasing efforts, rush orders, expediting, clearance sales and returns to vendors (for returnable items). And, warehouse space would be freed up, and less effort would be needed for receiving, put away and counting; warehouse staffing might be reduced.

Here is an outline of some of the changes -- which are all meant to function automatically, so little or no human intervention is needed.

Analyze order history data for unusual data that would distort inventory levels, and if a condition is within a pre-defined tolerance, adjust the data; if a condition is outside the tolerance, list the item on an action report.

Calculate safety stock based on target service level and the factors that can result in not having enough planned stock on hand when its needed.

Allow for trends when calculating lead time.

If the history data for an item is outside the tolerance, don't calculate safety stock or lead time or a forecast; list the item on an action report.

If the history data for an item contains too many gaps, don't calculate safety stock or lead time or a forecast; list the item on an action report.

Treat very slow moving items differently than items that move fast, but don't require human intervention -- treat them automatically.

Let the system determine the most accurate method of forecasting

The system can determine the most profitable service level.

Identify items for which the service level is too high.

Calculate the true cost of buying more than is needed now, vs. waiting and buying later.

Calculate whether a deal is too good to be true for the distributor (its always good for the supplier).

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Dick Friedman, the author, is a recognized expert on inventory management and warehouse operations and technology for distributors. He is an unbiased Certified Management Consultant and does NOT SELL software, systems or warehouse technology. From 30 years of experience, he developed unique techniques for keeping inventory low without hurting customer service. And he developed a 115-point Quality Methods checklist he uses to help distributors prevent warehouse mistakes and reduce operating costs -- often through inexpensive, quick changes. Call 847 256-1410 for a FREE consultation, or visit www.GenBusCon.com for more information or to send e-mail