The Smart Forecaster
Pursuing best practices in demand planning,
forecasting and inventory optimization
The Min/Max inventory policy is one of four available Replenishment methods in SIO. When the inventory level drops to or below the Min, a replenishment order is generated. The reorder quantity is the number of units needed to raise the stock up to the Max. How do you know your Min/Max settings are working well and triggering replenishment orders at the right time and for the right quantities? If you are like most companies, setting Min/Max levels is based on rules of thumb or simple averaging techniques that don’t expose the trade off curve between service level and inventory cost. This makes it impossible to predict which items are likely to have overstocks and shortages in the future. In this Video Blog we elaborate on this and describe how Smart Inventory Optimization can help.
Inventory optimization has become an even higher priority in recent months for many of our customers. Some are finding their products in vastly greater demand; more have the opposite problem. In either case, events like the Covid19 pandemic are forcing a reexamination of standard operating conditions, such as choices of reorder points and order quantities.
Ensure inventory policy matches business strategy. Various team members can create their own scenarios, perhaps dividing the work by product line or sales territory. One decision maker can then merge these scenarios into a consensus plan.
This short note is about one way your business can develop a plan to adjust to one of the likely fallouts from the virus: sudden increases in the time it takes to get inventory replenishment from suppliers. Supply chains around the world are being disrupted. If this happens to you, how can you react in a systematic way?