Inventory Analysis and Policy Development
Many companies have identified the need to reduce stock holdings, but do not know how to develop, implement and maintain a suitable inventory policy to minimise stock whilst maintaining service commitments.
Using historical and forecast data, the Warehouse Consultants and Inventory Management team at Gideon Hillman Consulting are able to design an optimised inventory policy specifically for the profile of your business. That policy is then further supported by the provision of dynamic models, allowing you to maintain and refresh the calculations without the need for extended or unnecessary consultant time.
Effective Inventory Management
The typical inventory management areas considered by our consultants to optimise inventory are:
Cycle Stock
The minimum quantity of stock needed to cover the average expected demand during the replenishment lead time. This stock calculation is then further supported by:
Replenishment Lead Time Safety Stock
A statistical calculation that assesses, based on historical data, the probability of variation in the replenishment quantity or the replenishment lead time. This calculation is then optimised against your target service requirements per SKU to deliver an optimal safety stock.
Demand Variation Safety Stock
Again, this is a statistical calculation, based on historical data, but this calculation considers possible variation of customer demand. As with the Replenishment Lead Time Safety Stock, the calculation is optimised against target service requirements to provide the optimal safety stock.
We also further enhance the impact of our proposed inventory policies with:
ABC analysis of SKUs
- To determine fast moving/high value product vs. slow moving/low value product.
- Purpose 1: Vary target stocks by level of value to the business (thus reducing working capital deployed)
- Purpose 2: Identify obsolete stock that could be delisted
Economic Order Quantities (EOQ)
- A model that balances purchase costs and holding costs against demand.
- Purpose: To identify the optimal purchase quantity when considering the total costs (purchase, handling, storage, working capital) and not just the direct purchase cost.
