Inventory Analysis and Optimization

Inventory Analysis, Projection and Optimization

It's hard to understate the importance of good inventory management.  Too little and you risk lost sales from Stock-Outs, too much inventory and you're probably also using too much space, labor and capital. For manufacturing firms, distributors and retail shops alike, inventory can be the largest and most important asset on the books. 

Gauging the correct amount of an item to order, when to order it, from which supplier, terms of payment, and safety stock levels can be a tricky question to answer. Following rules of thumb, reliance on experience and luck can sometimes prove fruitful; however, without any tools to quantify even a rough optimal level of inventory a firm can find itself quickly strapped for working capital that can end a great business before it begins.

How can you miss what you never had?   Firms fortunate enough to have a grip on inventory and have not yet been pinched by Stock-Outs or had working capital squeezed by inventory sitting on stock room shelves may not realize the amount of capital tied up.  For these firms the sense of urgency is muted. Though no inventory 'catastrophe' has occurred your firm may still be a long cry from optimal. Your return on investment in inventory is never as easy as Sales - Cost.  In fact, gross margin simply can't reflect the multiple opportunity costs that inventory can rob you of.  We can set-up, apply and monitor several simple measurements that will help you ensure that you are maximizing the profitability and productivity of your investment in inventory!

Items we take under consideration while analyzing inventory levels:

  • Current methods used
    • Management know how
    • ERP systems, spreadsheets and databases
  • Line item historical Sales, Costs, Volumes
  • Seasonality, Timing and Frequency of Sales and Orders
  • Stock out Frequencies and Durations
  • Lead times observed vs optimized
  • Special order items
  • SLOB - Slow moving / Obsolete

Please call us today (214) 890-4069. We are happy to offer you a free consultation.