What do you do if your inventory levels are out of control and stock optimization is a challenge?

To get started, you need to figure out what data you currently have and how reliable is it. Where are your demand signals coming from?(Warehouse usage, sales data, etc.). Do you have all the data captured? Similarly, where are you inbound signals coming from, (purchase order receipt, inbound receipt, bill of ladings, etc.). Do you have all the data captured? If the answer is no for both find a way to augment the data via your ERP system or other means (most of the time, excel). Is the data 100% correct? If so, how much of it is reliable. When you quantify these, it's easier to make decision on what you need to do. Tighten down control of data capture is the best way to keep high quality for use in inventory management.

1. Analyze demand: Review sales data and forecast demand to identify patterns and trends. 2. Identify bottlenecks: Determine the root cause of stockouts (e.g., supplier lead times, production capacity, or inventory management issues). 3. Implement just-in-time (JIT) inventory management: Order and receive inventory just in time to meet customer demand. 4. Use economic order quantity (EOQ): Calculate the optimal order quantity to minimize costs and maximize efficiency.

We would begin by gathering comprehensive data on our inventory, including stock levels, turnover rates, sales trends, and procurement lead times. This data can provide a clear picture of the current situation and serves as a foundation for analysis. We would identify potential risks and vulnerabilities associated with inventory management, such as stockouts, overstocking, obsolescence, and supply chain disruptions. Understanding these risks can enable us to develop contingency plans and mitigation strategies. We would assess key performance indicators (KPIs) related to inventory management, such as inventory turnover ratio, carrying costs, stockout rates, and fill rates to pinpoint areas of inefficiency and opportunities for improvement.

We would employ ABC analysis to categorize inventory items based on their value and contribution to overall revenue. A-items, representing high-value and high-demand products, receive top priority, while C-items, with lower value and demand, receive less attention. We would evaluate the profitability of each inventory item by considering factors such as margin contribution, storage costs, and obsolescence risk. Items with higher profitability are to be prioritized for optimization efforts. We would assess the criticality of inventory items to business operations and customer satisfaction. Items essential for fulfilling customer orders or supporting production processes can be prioritized to prevent disruptions and maintain service levels.

Invest in robust inventory management software that offers features like demand forecasting, real-time tracking, and automated reorder points. Such tools provide visibility into inventory levels, streamline stock replenishment, and optimize inventory turnover.

We would be evaluating our existing inventory management systems and processes to identify gaps, inefficiencies, and areas for improvement. We would define clear and specific requirements for the new inventory management systems based on our assessment findings and business objectives. These requirements may include functionalities such as demand forecasting, inventory tracking, procurement management, and reporting capabilities. We would research and evaluate various inventory management software solutions available in the market to find the best fit for our needs. This involves considering factors such as features, scalability, ease of integration, user interface, and cost.

We would map out our current inventory management processes from procurement to order fulfillment. This involves documenting each step, inputs, outputs, stakeholders involved, and any dependencies between processes. We would identify pain points and bottlenecks within the inventory management processes that contribute to the challenges we're facing. This may include issues such as inaccurate forecasting, long lead times, excess inventory, or inefficient workflows. We Would engage the stakeholders including procurement, sales, finance, and operations, to gain diverse perspectives on inventory management processes. Collaboration fosters alignment, encourages knowledge sharing, and generates innovative ideas for improvement.

We would collaborate closely with our suppliers to understand their capabilities, constraints, and expectations. By involving suppliers in our inventory management processes, we can co-create solutions, optimize supply chain efficiency, and mitigate risks. We would engage in joint planning and forecasting with our suppliers to align production schedules, inventory levels, and order quantities. Collaborative forecasting can enable more accurate demand planning and reduces the risk of stockouts or overstocking. We would establish effective mechanisms for resolving disputes promptly. Addressing issues and finding mutually acceptable solutions can help to maintain trust and prevent disruptions in the supply chain.

1.Apply 80:20 the 80 percent of sales will come from 20 percent of the articles. Rest 80 percent you should order as per requirement. 2.do a schedule and sudden audit.a schedule audit can be done for all the inventory whereas a sudden checks can be done for skus where you expect more deviation. 3. Use proper tools and techniques to record material movement

If inventory levels are out of control and stock optimization is a challenge, I analyze root causes, improve forecasting accuracy, optimize inventory levels, streamline processes, and monitor metrics for ongoing adjustments.