The Smart Forecaster

 Pursuing best practices in demand planning,

forecasting and inventory optimization

When implementing inventory optimization, the pressure is on to get results.  As the Major League Baseball season starts it’s final stretch towards the playoffs, we thought this analogy might help enforce an important point about the pace of deploying a new inventory optimization process.

 

The Situation

It’s the bottom of the ninth and your team is down by a run.  You step up to the plate batting lead-off. With the roar of the crowd and excitement in the air, you are tempted to swing hard for that elusive home run.  As you dig into the batter’s box, you weigh the options and decide on a better approach: stay patient and do whatever you can to get one base.  You don’t try to hit a home run and focus on making good contact with the ball. You know that in this situation, a single will do.  By getting on base you help build team confidence.  Most importantly, you put the team in a better position to win the game than taking an aggressive but risky swing of the bat.

3 Reasons for a Progressive Approach to Inventory Optimization

When the pressure is on to optimize inventory, you might want to move fast much like the hitter who wants to hit that home run.  And in some cases, swinging for the fences might be the recommended approach.  More often than not, a progressive approach to inventory optimization is more effective.  Here are three reasons why:

  1. It builds user confidence and creates momentum
  2. Early success buys necessary time to get full management buy-in
  3. Corporate roll out of a new process requires progressive evidence of success

 

Industry Example

A case in point is a multinational company offering next day PC and electronic device repair services.  They never know what will come in for repair, but need to set inventory policy to meet their next day service commitment for thousands of parts, while keeping inventory to a minimum.  They’ve chosen our inventory optimization software to help and are in the process of implementing.  The planning team has taken this progressive approach, working brand by brand to set optimal reorder points and order quantities using Smart’s probability forecasting engine.  They selected one brand to illustrate the process and show results: starting with 26 items, they filtered out 14 parts with little or no demand history.  Assessing the remaining 12, they showed how to reduce inventory by $51,000 while increasing service levels.  While the $51,000 reduction was just a small proportion of the overall benefit, it was easily understood, and presenting it has helped gain support to build out their inventory optimization implementation, brand by brand across the company.

Confidence is Key

User confidence is key and this comes with mastering the use of the inventory optimization software and being able to present results.  So, too, is management confidence.  We have encountered situations where optimization scenarios have clearly shown opportunities for large inventory savings, but staff were reluctant to seize them.  Why?  Because they would be reducing inventory, and that felt risky.  Again, selecting a subset of items, working through the optimization process, and gaining the top-down management support to make the change made all the difference.  And they will substantially reduce their inventory as a result.

Inventory Optimization success comes with a motivated team, the right technology, and solid execution of a good plan.  A progressive approach to implementation reduces risk, validates the plan, and provides the foundation for an effective inventory planning and optimization program.

Download Smart Inventory Optimization product sheet here: https://smartcorp.com/inventory-optimization/

Leave a Comment

Related Posts

Direct to the Brain of the Boss – Inventory Analytics and Reporting

Direct to the Brain of the Boss – Inventory Analytics and Reporting

In this blog, the spotlight is cast on the software that creates reports for management, the silent hero that translates the beauty of furious calculations into actionable reports. Watch as the calculations, intricately guided by planners utilizing our software, seamlessly converge into Smart Operational Analytics (SOA) reports, dividing five key areas: inventory analysis, inventory performance, inventory trending, supplier performance, and demand anomalies.

How Are We Doing? KPI’s and KPP’s

How Are We Doing? KPI’s and KPP’s

Dealing with the day-to-day of inventory management can keep you busy. But you know you have to get your head up now and then to see where you’re heading. For that, your inventory software should show you metrics – and not just one, but a full set of metrics or KPI’s – Key Performance Indicators.

Confused about AI and Machine Learning?

Confused about AI and Machine Learning?

Are you confused about what is AI and what is machine learning? Are you unsure why knowing more will help you with your job in inventory planning? Don’t despair. You’ll be ok, and we’ll show you how some of whatever-it-is can be useful.

Recent Posts

  • Why inventory planning shouldn’t rely exclusively on simple rules of thumbWhy Inventory Planning Shouldn’t Rely Exclusively on Simple Rules of Thumb
    For too many companies, a critical piece of data fact-finding ― the measurement of demand uncertainty ― is handled by simple but inaccurate rules of thumb. For example, demand planners will often compute safety stock by a user-defined multiple of the forecast or historical average. Or they may configure their ERP to order more when on hand inventory gets to 2 x the average demand over the lead time for important items and 1.5 x for less important ones. This is a huge mistake with costly consequences. […]
  • Direct to the Brain of the Boss- Inventory AnalysisDirect to the Brain of the Boss – Inventory Analytics and Reporting
    In this blog, the spotlight is cast on the software that creates reports for management, the silent hero that translates the beauty of furious calculations into actionable reports. Watch as the calculations, intricately guided by planners utilizing our software, seamlessly converge into Smart Operational Analytics (SOA) reports, dividing five key areas: inventory analysis, inventory performance, inventory trending, supplier performance, and demand anomalies. […]
  • You need to team up with the algorithms for Inventory ManagementYou Need to Team up with the Algorithms
    This article is about the real power that comes from the collaboration between you and our software that happens at your fingertips. We often write about the software itself and what goes on “under the hood”. This time, the subject is how you should best team up with the software. […]
  • Rethinking forecast accuracy, A shift from accuracy to error metricsRethinking forecast accuracy: A shift from accuracy to error metrics
    Measuring the accuracy of forecasts is an undeniably important part of the demand planning process. This forecasting scorecard could be built based on one of two contrasting viewpoints for computing metrics. The error viewpoint asks, “how far was the forecast from the actual?” The accuracy viewpoint asks, “how close was the forecast to the actual?” Both are valid, but error metrics provide more information. […]
  • Using Key Performance Predictions to Plan Stocking Policies
    I can't imagine being an inventory planner in spare parts, distribution, or manufacturing and having to create safety stock levels, reorder points, and order suggestions without using key performance predictions of service levels, fill rates, and inventory costs. […]

    Inventory Optimization for Manufacturers, Distributors, and MRO

    • Top Differences between Inventory Planning for Finished Goods and for MRO and Spare PartsTop Differences Between Inventory Planning for Finished Goods and for MRO and Spare Parts
      In today’s competitive business landscape, companies are constantly seeking ways to improve their operational efficiency and drive increased revenue. Optimizing service parts management is an often-overlooked aspect that can have a significant financial impact. Companies can improve overall efficiency and generate significant financial returns by effectively managing spare parts inventory. This article will explore the economic implications of optimized service parts management and how investing in Inventory Optimization and Demand Planning Software can provide a competitive advantage. […]
    • Centering Act Spare Parts Timing Pricing and ReliabilityCentering Act: Spare Parts Timing, Pricing, and Reliability
      In this article, we'll walk you through the process of crafting a spare parts inventory plan that prioritizes availability metrics such as service levels and fill rates while ensuring cost efficiency. We'll focus on an approach to inventory planning called Service Level-Driven Inventory Optimization. Next, we'll discuss how to determine what parts you should include in your inventory and those that might not be necessary. Lastly, we'll explore ways to enhance your service-level-driven inventory plan consistently. […]
    • 5 Steps to Improve the Financial Impact of Spare Parts Planning5 Steps to Improve the Financial Impact of Spare Parts Planning
      In today’s competitive business landscape, companies are constantly seeking ways to improve their operational efficiency and drive increased revenue. Optimizing service parts management is an often-overlooked aspect that can have a significant financial impact. Companies can improve overall efficiency and generate significant financial returns by effectively managing spare parts inventory. This article will explore the economic implications of optimized service parts management and how investing in Inventory Optimization and Demand Planning Software can provide a competitive advantage. […]
    • Bottom Line strategies for Spare Parts Planning SoftwareBottom Line Strategies for Spare Parts Planning
      Managing spare parts presents numerous challenges, such as unexpected breakdowns, changing schedules, and inconsistent demand patterns. Traditional forecasting methods and manual approaches are ineffective in dealing with these complexities. To overcome these challenges, this blog outlines key strategies that prioritize service levels, utilize probabilistic methods to calculate reorder points, regularly adjust stocking policies, and implement a dedicated planning process to avoid excessive inventory. Explore these strategies to optimize spare parts inventory and improve operational efficiency. […]