Mastering Inventory Management
How to Improve Inventory Turnover Using DIOH
Effectively managing inventory requires understanding a couple of key metrics and how those metrics can be used to minimize total inventory on hand while also maximizing a targeted customer service level. The amount of inventory a product-centric business has on hand can be measured by determining the number of days required to either sell or consume that inventory given either historical or forecast trends. In this article we will focus on using historical trends to determine the Days of Inventory On Hand (or DIOH) as a key metric for analyzing inventory trends. Next we will show you how to compute a customer service level and how it can be used in conjunction with resupply lead times to compute Reorder Points that meet a targeted Customer Service Level that will both delight your customers while also minimizing inventory assets.
Where’s My Damn Widget? – 5 Steps to Improved Inventory Accuracy Using a Cycle Counting Program
Inventory accuracy is a key organizational capability for any manufacturer and distributor to assist with both maintaining a reasonable level of inventory on hand while also not expending scarce cash resources on excessive amounts of inventory. Much of the issue derives from weak business processes around managing the movement, receipt, shipment and disposal of inventory. Does your business conduct a full wall-to-wall physical inventory on an annual basis? Doe your business conduct more than an annual full physical inventory? By implementing a cycle count program you will see the following: 1) obviate the need for full physical inventories; 2) gain regular insight into the performance and metrics around how inventory is managed within your business; and 3) institute a more continuous process improvement culture that will pay benefits well beyond just inventory management.
Boost Inventory ROI and Service With Smart Strategy Leveraging Our OptiStock Simulator
The OptiStock Simulator is an inventory optimization tool that transforms ones ability to model and implement inventory management strategies that boost inventory ROI and cash flow. The model features a statistical inventory simulation allowing users to input variables pertaining to lead time, customer service, profitability, etc., that are fed into a scenario model which is iterated to simulate a most likely outcome. The simulation outcomes are recorded for ease of comparison. Depending on your goals, you can quite easily optimize for Gross Margin Return on Inventory (GMROI), Days Inventory On Hand (DIOH), Gross Profit and/or Cash Flow. The article goes into detail about the required input variables, calculated constants, such as reorder points and order up to levels. Additionally, there is an example of using OptiStock Simulator with a baseline case and two other scenarios with comparison and conclusions regarding the impact of the tweaks made to the two scenarios. OptiStock Simulator workbook is meant as a tool to analyze an individual finished good or other inventory item, than can then be extrapolated by a business across a wide swath of like items (e.g. all items coming from the same vendor). This tool is essential for businesses seeking to refine their inventory strategies and achieve optimal performance.
