The big picture - what happens during processing

This video dives deeper into the processing section of the big picture video, describing critical data, classification, inventory policy, forecasting and the computation of ideal inventory levels.
 

Read the tutorial

The big picture video

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“The big picture” video describes the connection between your objectives, the data extracted from your ERP and the configuration of the App.

The App computes ideal inventory levels, then compares these with your current stock levels to highlight inventory exceptions and recommend ideal orders.

Dashboards track KPI, enabling you to assess whether you are achieving your objectives and adding value to your business.

Let’s take a closer look at what actually happens during processing.

 

The stocking indicator (critical data)

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The most fundamental piece of data that you want to ensure is well maintained is the stocking indicator, which may be set in your ERP, in the App or by a combination.

The stocking indicator is critical because it identifies how an item should be ordered and how it will be evaluated for inventory exceptions.

 

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Obsolete items will never be ordered under any circumstances.

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

Stocked items must be ordered in anticipation of sales and the intent is to supply customers from available stock.

 

Classification by ABC and HML

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To highlight the few stocked items that contribute to 80% of your sales value, the App classifies your stocked items into A, B or C.

 

 

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Your inexpensive items that sell in large quantities often get lost in the C items, so the App simultaneously classifies your items by unit sales or velocity (high, medium and low).

 

Set the direction with inventory policy

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The resultant matrix enables you to set higher target service levels and longer replenishment cycle settings for these items (brown square, bottom right).

This means less frequent orders, and frees up time to focus attention on those items that sell in large quantities and contribute significantly to your sales value (green squares).

Or your expensive slow moving items (brown square, top left), that can result in expensive mistakes.

 

Items navigate their way through the product lifecycle

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Setting inventory policy using these matrix groupings, ensures that as items navigate their way through the product lifecycle, they will change position in the matrix and attract appropriate inventory policy settings.  

 

The App generates item forecasts

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For every stocked item, the App generates a demand forecast, an initial view of the anticipated future sales.

 

Manual forecast adjustments

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A small percentage of items will require manual intervention, where forecast amendments will improve the demand forecast by factoring in your market knowledge.

 

Computing ideal inventory levels

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The App then uses this forecast to determine the optimal inventory levels, by converting the components of inventory from days to units.

If you ordered an item today, the order would be available for sale a lead time from now.

The safety stock is there to protect you from a late delivery from your supplier or an unexpected spike in sales.

The replenishment cycle defines how often the item is expected to be ordered.

 

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Converting each of these components from days to units by looking at the future demand, results in dynamic inventory levels that are appropriate for the anticipated sales.

 

Ideal order recommendations

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These optimal levels are then compared to your current stock on hand plus on order, to determine whether the item should be ordered, whether it is OK, or whether there is an inventory exception that should be investigated.

 

In summary

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In summary, all items provided in the data from your ERP are categorised as stocked, non-stocked or obsolete, either in your ERP, in the App, or a combination.

 

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Obsolete items

Obsolete items are not ordered under any circumstances and all available stock is flagged as excess.

 

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Non-stocked items

For non-stocked items, all available stock and on order should be covered by existing orders from your customers. Any shortfall will be recommended for order, and any surplus will be deemed to be in excess.

 

Stocked items

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The App classifies all stocked items by both value and velocity, using the resultant matrix to both provide focus and to set macro inventory policy.

 

App-generated forecasts

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The App also generates a forecast for every item in every location every day.

 

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Manual forecast overrides factor in your market knowledge, ....

 

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... and the App uses this adjusted forecast, together with the components of inventory, to compute appropriate inventory levels for the anticipated sales.

 

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Compare dynamic inventory levels against available stock

Testing these ideal levels against your current stock on hand and on order, ...

 

 

... highlights key inventory exceptions and recommends ideal orders.