As a distributor or manufacturer your largest and most costly asset is inventory. Reducing inventory carrying cost and increasing margins can cause a greater effect on the bottom line than increased sales. By doing both, you will significantly increase profitability.
Also, in order to survive and thrive in today’s competitive marketplace companies should focus on managing your inventory as though the future of your business depends on it; because it probably does.
A good place to start is by investing in the right demand planning system technology. It will require a capital investment and require effort to implement this technology, however, the potential benefits are worth it.
Industry consultant Jon Schreibfeder indicates that the payback for the total cost and effort of implementing this type of advanced inventory management solution can be obtained in just a few months. And he’s often seen reductions in inventory value of more than 35% over the course of a few months, while increasing customer service levels at the same time.
Not sure if you need a demand planning system? Here are key signs that indicate you do:
- You have too much inventory, but still experience stockouts of key items.
- Even though inventory levels are too high, you still struggle with identifying the over-stocked items.
- Too many hours are spent reviewing items for replenishment.
- You spend too much time identifying appropriate replenishment quantities for spoke items.
- Your system does not consider vendor price breaks and vendor targets that make the most sense for your situation when it makes purchase recommendations.
- You have to manually manage sporadic, erratic, and slow-moving items.
- Your system continues to use the same forecast even after you’ve over-consumed it.
Do any of these indicators sound familiar? If you don’t have what your customers want, they’ll go elsewhere. And if you have excess inventory your carrying costs can consume your profits.
Learn more about Inventory Demand Planning Systems