In this publication we demonstrate how to get the most benefit from the proper interpretation and use of Datup's Optimised Inventory.
The solution facilitates proactive inventory management, avoiding stock-outs, stock-outs or overstocks that negatively impact the financial balance of the supply chain through lost sales or capture of working capital in surplus inventories.
These use cases allow the analyst to take into consideration various fields of the results cubes, which better guide the decision making process with respect to the current and forecasted availability of each item in the different distribution centres. The same applies to the dynamic knowledge of safety stocks, reorder points, break dates and, above all, reorder quantities.
Basic Use Case: Suggested Reorder Management
The use case guides better decision making for:
Know the exact reorder quantity per item and distribution centre.
Determine the timing of reordering by item and distribution centre.
The most important value in the optimised inventory management corresponds to the reorder quantity, which is dynamically calculated and updated daily in the column Reorden SugeridaThe reorder quantity takes into account the stock on hand in order to avoid stock-outs or cost overruns due to oversupply. The reorder quantity takes into account the stock on hand. Inventario and quantities in transit En Tránsito to cope with the demand forecast for the coming periods. Pronóstico Sugeridothe committed units Comprometidosand the safety stock Stock de Seguridad.
1Reorden Sugerida = Inventario + En Tránsito - Pronóstico Sugerido - Comprometidos - Stock de Seguridad
The reorder quantity or Reorden Sugerida can take negative values, preceded by a minus sign ( - ), indicating that the available and incoming stocks are not sufficient to meet the projected demand and to maintain the safety stock. Therefore, the negative value calculated corresponds to the quantities to be ordered, purchased or produced.
If, on the other hand, the reorder quantity shows a positive value, it indicates that the stock on hand and in transit is sufficient to cope with future demand and to cover the safety stock. However, it is important to compare the value of the Reorden Sugerida with the reorder point Punto de Reorden to know when the reorder should be placed, as due to the frequency of product consumption and delivery leadtimes, it is possible to face a stockout before the replenishment is completed. Thus, if the suggested reorder Reorden Sugerida is less than the reorder point Punto de ReordenThe purchase or production order must happen immediately. If Reorden Sugerida is greater than the reorder point Punto de ReordenIf the values are very close or equal, you must wait until the values are very close or equal to generate the reorder. Otherwise, there is a risk of over-supply.
Intermediate Use Case: Availability and Breakage Management
The use case guides better decision making for:
Manage inventory in an integrated way considering total stock and per distribution centre.
Track orders in transit and actual availability.
Generate alerts on inventory break dates based on stock, transits and availability.
It is important to note that the Optimised Inventory cube (Qinvopt) is updated on a daily basis, therefore the data therein reflects the inventory status as of the previous day's cutoff.
The first columns that allow the identification of the items under analysis are Item y DescripciónThese contain the unique identification code and the most intelligible description of each item, respectively. In some cases there is a CeDi which designates the location of the item with significant business value. For example, the location of the item by channel, point of sale, customer, distribution centre or similar.
Below is the column Inventario with the existing quantities of items by warehouses, stores or distribution centres (CeDi) of the items. The number of columns may vary depending on the number of storage or distribution sites of the business. En Tránsito allows to know the quantities in transit to be taken into account in the inventory, i.e. those that have a purchase order in force and whose total or partial delivery is pending.
The column Disponibilidad sums the total stocks at storage and distribution sites, together with the quantities in transit.
1Disponibilidad = Inventario + En Tránsito
Finally, Fecha Quiebre allows the analyst to know the potential inventory break date, taking into account the stock on hand and the average daily consumption rate of each item, based on historical demand.
1Fecha Quiebre = Días Quiebre + (Inventario - Stock Seguridad) / Uso Promedio Diario
Advanced Use Case: Inventory Management with Demand Planning
This use case guides better decision making for:
All insights from the basic journey.
Integrate demand planning with inventory management, taking historical and forecast data one or several months into the future.
Automatically and dynamically know the ideal volumes for safety stocks and reorder points.
Generate alerts on stock out dates, taking into account short, medium and long term demand forecasts.
At this point, demand planning and inventory management start to play a joint role within the Datup solution to form the Optimised Inventory. The objective is to provide the analyst with a forward-looking view of future inventory behaviour, taking into account demand forecasts. The first 2 columns to consider are Hitórico Demanda y Pronóstico Sugerido. The first one contains the average monthly demand for the last months, while the second one shows the forecasted volume for the following future periods, from 1 to 6 months. Based on these results, the following is generated Disponibilidad Sugeridacolumn, similar to Disponibilidadincluding stocks in inventory plus units in transit and discounting the demand forecast.
1Disponibilidad Sugerida = Inventario + En Tránsito - Pronóstico Sugerido
In this way, it is possible to know the coverage of the future demand with the available inventories with their exact date at Fecha Quiebre Sugerida. And in the process, determine the units to be included in the production plans.
1Fecha Quiebre Sugerida = Días Quiebre + (Disponibilidad Sugerida - Stock Seguridad) / Uso Promedio Diario
Accompanying availabilities and forecasts, safety stocks are estimated. Stock Seguridad and reorder points Punto de Reorden. Both dynamically, as they take into account the average daily consumption of each item over the last year and the historical lead times between purchase and delivery of the product. The platform identifies maximum, minimum and average consumption and lead times during the analysis period to calculate reserve and repurchase quantities against historical evidence, rather than predefined values.
The dynamic calculation of the safety stock is:
1Stock Seguridad = (Uso Diario Máximo* Lead Times Máximos) - (Uso Promedio Diario* Lead Time Promedio)
In turn, the reorder point is calculated as follows:
1Punto de Reorden = Uso Promedio Diario * Lead Time Promedio + Stock Seuridad
Advanced Use Case: Optimised Inventory (Experimental)
This use case guides better decision making for:
All insights from the advanced journey.
Know the costs of inventory ownership, such as opening, closing, production and goods sold costs.
Generate alerts for items with low turnover in order to propose working capital release strategies.
Generate alerts for items with high days of inventory, in order to implement strategies for the reduction of obsolete items.
Opening costs Costo de Apertura, closure Costo de Cierre and production Costo de Produción refer to the value of the inventory at the beginning, end and middle of an operating period, usually covering one year. Based on these costs of ownership, it is possible to calculate the indicator Bienes Vendidos which sums the opening and production values minus the closing value.
Thus, it is possible to estimate two of the most important indicators for the Optimised Inventory: Días de InventarioThis allows the identification of those items with the longest storage times, and therefore represent the focal points of working capital concentration. Timely identification allows the business to launch sales and/or promotion initiatives for these potential obsolete items. The second indicator is Volumen de Ventas de Inventariowhich shows the number of times a particular item has been rotated in a year. Ideally, items are expected to have high turnover numbers, as this results in lower operating and storage costs and expenses. In this case, it is also possible to generate alerts on items with very low turnover in order to promote more dynamic sales or exit strategies.