Is Your Inventory Replenishment Software Working?
When you have out-of-stocks and overstocks at the same time, the question you need to ask is Do You Need better Inventory Replenishment Software? Inventory Replenishment is a critical link in your supply chain. Ask yourself, is your current inventory replenishment software delivering the best service levels to match your customer demand? Does your inventory replenishment software maximize profitability with inventory optimization technology to create purchase orders? Do your automated Purchase Orders minimize inventory to carry only what is needed to meet service goals and still meet supplier shipping requirements? Do your users have tools on the Purchase Order pages to aid the Purchase Order approval and exception management processes? If not, then why not, what are you losing to your competition every day you do nothing?
Inventory Replenishment Software
There are essentially four different aspects of successful inventory replenishment and sadly the fourth is often missing in the inventory replenishment software:
- What – Demand Forecast is the future demand for your products – this drives replenishment.
- When products need to be reordered to meet demand (Demand Driven Lead Times to tell you the item order point – bottom-up (JIT), not a plan)
- How many Units of those products need to be ordered? Your days’ supply should be calculated based on demand forecast, not last x week’s sales, using on hand and on order inventories. How many units to purchase should be the difference between your Order Up to Amount (max) (SS+LT+OrCy) – (on hand + existing on order). The amount should be rounded to next product UOM pack listed by the supplier.
- Purchase Order Generation that properly addresses your product unit needs in conjunction with vendor requirements (Computer automated purchase orders meet BOTH service and supplier shipping constraints)
While some inventory replenishment software applications are capable of helping you meet one, maybe two of these PO needs, there is much more involved in the process if you want to ensure maximum profits with minimal expense.
These four aspects of inventory replenishment software are also the four danger signs. Anyone of these done wrong can bankrupt your company eventually. Do two or more of these wrong consistently and you can expect the end of your company.
Replenishment users are pushed and pulled by yesterday’s technology. They are using systems based on old technology with bad data, poor exception management, and antiquated communication. These methods just don’t work in today’s modern marketplace.Read one of our Top Blogs now: Differences in Inventory Replenishment Methodology: Facts and Myths
Demand Forecasting for Accurate Product Availability
An essential component of accurate and cost-effective inventory replenishment software is demand forecasting. Demand forecasting uses retailer demand inputs that curve demand and customer demand data to determine exactly when you need specific products on hand to successfully meet your consumers’ buying habits. Inventory replenishment software that incorporates proper demand forecasting ensures that your company has the appropriate products available to meet your customers’ future buying habits.
Accurate Lead Time for Enhanced Replenishment
It is a fact: Lead Times change; it’s what do you do to manage the change that matters. You need to know when Supplier Lead Times change and you need an automated way to tell you when they change – only if the change is significant to your business. Effective inventory optimization requires an intricate understanding and application of vendor lead times to ensure that your products are available to customers, no matter when the replenishment order will be available. Numerous factors affect lead time. These include the amount of time needed for product manufacturing, the time needed for preparing those products for shipment, the amount of time required for transportation to distribution centers, and the number of days between shipments from the distribution center to your location. Tracking, forecasting and implementing accurate lead time information is vital to minimizing your risks.
When all of this information is analyzed and used properly within your inventory replenishment software, it ensures that you order the correct number of inventory units to meet demand and current supply conditions. Inventory replenishment software systems that cannot properly integrate lead time forecasted information cannot provide accurate in-stock quantities to cover the time between shipments or protect against unnecessary overstock.
Purchase Order Generation
Optimal Purchase Order creation is a key component for enhanced inventory optimization. Some inventory replenishment software applications simply generate a purchase order at scheduled times to ensure proper on-hand stock. However, most of these programs cannot account for individual vendor units of measure, minimum order requirements, product flow, and other constraints. When this data is not included in the purchase order generation, the result is improper levels of stock. Some items may be out of stock before the next shipment, and others may end up as overstock. Either of these scenarios can cost you money due to lost sales or an inability to move products before expiration.
Building Replenishment Purchase Orders is Complex
Purchase Order Generation has gotten very complex. As logistics companies get smarter about how to lower shipping costs, the constraints to placing a purchase order have gotten more complex. Most companies are using Excel and old purchase orders to create new purchase orders. Numerous studies show the results are disastrous, including a minimum 10% overstock on most orders, missed shipping dates due to errors, and out of balance days supply inventories at the retail and DC location.
A Better Mouse Trap: Replenishment Meet Demand
If your inventory replenishment software is not meeting each of these functions properly, it is not accurately meeting the needs of your business or your customers. If you want an inventory optimization solution that maximizes profits by properly handling all aspects of replenishment, Contact Us today.
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