In today’s business environment, small scale and large businesses rely on technology for a smoother and more efficient workflow, with computer programs and software tailored to suit different company functions at different levels or sometimes integrated to allow for continuous display of information from top to bottom administrative levels. However, to have an effective supply chain management process, inventory must be closely monitored to ensure accurate impute of data.
Real-time analytics makes it easy for businesses to make decisions on goods and products after evaluating different data including; number of orders, procurement, production, sale, purchase, delivery. etc. Two aspects of inventory analytics which must be applied for maximum benefits include;
• Inventory Surplus
• Out of stock Items
For companies that produce perishable goods, it is inevitable to avoid some loss if the production of their products are not diligently managed. This will not only cause wastage in production materials; it will amount to losing money as expired goods cannot be distributed.
For these businesses, the insights gained from tracking key performance metrics will help to prevent unnecessary wastage and loss.
- Sales to Inventory ratio – This will show the rate of inventory flow to customers.
- Days of inventory – This will pinpoint the amount of money used for stored capacity. This metric should be compared to lead times and product demand for effective inventory planning.
- Total inventory- This is probably the most important factor in asset utilization as inventory is one of the largest items on the balance sheet.
- GMROI (or gross margin return on inventory) – This shows inventory investment by product. GMROI is an excellent measure because it allows decision-makers the chance to analyze inventory-related data down to the SKU (Stock Keeping Unit) level and more accurately determine how it relates to profitability.
Inventory optimization based on the above listed can help businesses find the balance between supply and demand variability and this is oftentimes immediately noticeable. This can be really helpful to distributors that invest a lot of capital in inventory as the smallest improvements in inventory planning can have a major effect on profit.
Out of Stock Items
Inaccurate dates on “Out of Stock” can do a lot of damage to a business. Not only will the company lose sales, but it could also go out of business. Business owners should not overlook the importance of using analytics to capture out-of-stock items as it will guide them on what is left, how, and when to restock. “Out of Stock” to one business, could mean the best time for another business and you don’t want to be the one that is “out of stock.”
To overcome the risk of stockouts one can set per levels and schedule reorder for inventory stock which will ensure that an alert your stock levels reach predetermined minimum quantities.