NETSTOCK | Overview of the menus | A specific location

A specific location

Use this page to view this location's:

  • Classification results, by ABC, HML and the matrix

  • Parameter settings for classification and policy, and any policy overrides

  • Inventory balance information

 

Classification - ABC (measured by value)

The ABC tab shows the result of the classification of items based on the value of their historical sales or future forecasts (depending on the classification parameters).

During classification:

  1. Obsolete items are highlighted and segregated

  2. Non-stocked items are highlighted and segregated

  3. Remaining (stocked) items are flagged as either A, B or C based on value

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For stocked items:

  • A category items represent the top 80%

  • B category items represent the next 16%

  • C category items represent the last 4%

Note: these % are set in classification parameters.

Definitions:

  • Stocked items are ordered in anticipation of sales (based on all future demand streams) and the intent is to supply customers from available stock

  • Non-stocked items are only ever purchased or manufactured when one of your customers orders it from you

  • Obsolete items will never be ordered under any circumstances

 

The classification results provide detail on items classified as A, B or C, plus reports on non-stocked and obsolete items.

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Hovering on the numbers shows, for A items, that:

  • 341 (or 7%) of the items have been classified as A

  • The stock value on these 341 items is 4.1m (48% of the total stock on hand)

  • A items contribute 2.3m (or 76%) of the total cost of sales

This means that only 7% of the items produce 76% of the sales. 

Obviously these items are very important to the business, hence their A classification.

 

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The graphics to the right of the classification results table display comparative percentages for:

  • Count: of items

  • Stock value

  • Cost of sales

Note: these comparative percentages are the % of the totals in the "Total" row in the table.

 

Classification - HML (measured by velocity)

The HML tab shows the result of the classification of items based on units, either historical sales or future forecasts (depending on the classification parameters).

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For stocked items:

  • H category items represent the top 80%

  • M category items represent next 16%

  • L category items represent the last 4%

Note: these percentages are set in classification parameters.

 

The matrix

Once every stocked item has been categorised, plotting ABC and HML together results in the matrix. Now you can see your inventory segmented by movement profile.

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From the matrix it is very easy to view the sku count, stock on hand value, average cost of sales and fill rates (target and actual) in each intersection.

 

Note: In a classic ABC categorisation, items with high unit sales but that are inexpensive get lost in the C category. By combining ABC and HML, these items typically end up in the CH (C by value, High by unit movement) segment.

 

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Now you can hone in on items displaying different characteristics and requiring different inventory stocking policy approaches, for example:

  • AH items (top right): your most critical items as they are fast moving and high value, and make up the bulk of your sales

  • AL items (top left): your expensive slow moving items, where over-stocking can be very expensive and the risk of obsolescence is high

  • CH items (bottom right): these items move very quickly but are typically small and inexpensive, so we can buy bigger quantities without adding much to overall inventory value nor risking obsolescence

  • CL items (bottom left): these items do not contribute much to the business and could be considered for de-ranging

 

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By clicking on the Count, Value or Demand buttons to the right of the matrix, a 3D graphic appears highlighting the relative value in each block for the selected option.

  • Count: shows the number of items in each segment

  • Value: shows the stock value of each segment

  • Demand: shows the forecast demand at cost in each segment (depending on the classification parameters, this could show cost of sales)

This is a great way to easily see where all of the stock value or sales of stocked items are in your business.

 

Parameters

There are four buttons under the classification results, namely:

  • Classification parameters: used to set the %’s for ABC & HML and the basis for the calculation (historical sales or future forecast)

  • Policy parameters: used to set inventory policy targets

  • Policy overrides: used to set inventory policy overrides for specific suppliers, locations, groups

  • Recalculate balance: used to apply any changes made to the classification or policy parameters

 

Classification parameters

The classification parameters define the rules to be applied during classification in the App.

 

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Any items set to Obsolete in the ERP are sent to NETSTOCK as Obsolete

By checking Classify obsolete items, items sent to the App flagged as Stocked are tested against the rules defined for setting the item to Obsolete.

If the item meets the criteria, its stocking indicator is changed by the App from Stocked to Obsolete.

 

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Any items set to Non-stocked in the ERP are sent to NETSTOCK as Non-stocked

By checking Classify non-stocked items, items sent to the App flagged as Stocked are tested against the rules defined for setting the item to Non-stocked.

If the item meets the criteria, its stocking indicator is changed by the App from Stocked to Non-stocked.

 

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ABC items and HML velocity items may be classified by forecast or by sales history (the default is by forecast which caters better for growing or dying products).

The percentages used to identify each categorisation are set here.

To apply any changes to the classification parameters to all items, click on Reclassify.

 

Policy parameters

Policy parameters enables you to set the target fill rate (service level) and replenishment cycle days by ABC and HML.

 

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Enter the target fill rate and replenishment cycle (RC) days by the matrix, considering the following:

  • A High items; these are very important items as they are fast moving and high sales value, so we want to offer good service on them

  • A Low items; these are expensive slow moving items and customers are typically prepared to wait a bit, so set lower target fill rates here

  • C High items; inexpensive items that sell in large quantities, so setting high target fill rates and buying bigger quantities will not add significant value to our inventory

Setting the policy:

  • Check Set this policy for all locations if you want to use this policy setting in ALL locations

  • Check Make this the default policy for new locations to apply this policy to any new locations that get added to the App

  • To apply the policy setting, simply click Apply policy

 

Policy overrides

Policy parameters are used to set the policy for the bulk of your items. Occasionally, you may need to apply different rules to a subset of items, for example: from a supplier, in a location, in a product group, or even a specific item across the business.

Policy overrides are used to set these different rules.

 

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The following may be overridden:

  • Stocking indicator

  • Replenishment cycle days

  • Target fill rate %

  • Lead time days

  • Minimum safety stock days

  • Maximum safety stock days

 

Recalculate balance

To recalculate the ABC, HML and Matrix balances based on any changes made to the Classification parameters or the Policy parameters, simply click Recalculate balance

 
 

Inventory balance

Inventory balance gives you a quick but comprehensive view of the health of your inventory, including your stocked, non-stocked and obsolete items.

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Each tab is broken down into:

  • Stocked items; the matrix view, with row & column totals

  • Non-stocked items; bottom row on the left

  • Obsolete items; bottom row in the middle

  • Grand total; bottom row on the right

Every single item is categorised as either:

  • OK; these items are in balance, with the available stock between the reorder point and the order-up-to

  • Excess; with inventory above the order-up-to level

  • Surplus orders; items with outstanding purchase orders that will generate excess stock when they are received

  • Potential stock-out; items predicted to stock-out before you can get more stock in

  • Stocked out; items that are out of stock right now

  • New item; items with stock on hand or on order for which there is no demand

The more balanced your inventory is, the more items appear on the OK tab.