What are the key inventory performance indicators (KPIs) that you use and how do you benchmark them?

El problema de la gestión del inventario es pensar que existe un óptimo permanente, los inventarios se mueven en un complejo balance entre el nivel de servicio deseado, el comportamiento de la demanda, la disponibilidad de materiales y la capacidad de invertir de la empresa, por mencionar solo algunos. Basado en lo anterior, cualquier movimiento de alguna de estas variables genera un nuevo óptimo para cada una de las partes que se manejan y esto hace que su gestión no pueda ser hecha de forma manual cada mes. En este mundo incierto necesitamos apoyarnos en tecnologías de gestión tipo MEIO que exploten los datos y trabajen en tiempo real sobre diferentes escenarios para proponer óptimos en u punto en específico

We work in an environment of demand needs in automotive. Short rule - if you don’t have it you can’t sell it. Very little waiting is tolerated. Key indicators we use to manage inventory…daily burn rate, growth rate, time and secret sauce. Goal is always to get ahead of demand. We would rather pay air freight than be without. Inventory is not an expense, it is an investment. Best return is the margin made!

1. Inventory Turnover Ratio: Measures how quickly inventory is sold and replaced within a specific period. Benchmark against industry averages or historical performance to assess efficiency. 2. Days Sales of Inventory (DSI): Indicates the number of days it takes for inventory to be sold. Compare against industry standards or target DSI to monitor inventory liquidity. 3. Stockout Rate: Measures the frequency of stockouts. Benchmark against acceptable levels based on customer demand and service level agreements. 4. Gross Margin Return on Inventory Investment (GMROI): Evaluates the profitability of inventory investments. 5. Fill Rate: Measures the percentage of customer orders filled completely from available inventory.

We are active in the auto spare parts industry. An industry where there is high capital turnover in its warehouse and inventory management is very important. We use multiple ABC analysis to optimize the inventory and we always try to provide the right service level to our customers so as not to suffer from shortages. Also, by defining the precautionary order point, we try to prevent shortages.

You are absolutely correct. They are the main three factors managing uncertainty. Cash flow impact, inconsistency in demand fluctuations and material availability.

Most of my experience has been with forecasting related to aggregates, which is more complex than one might think. Forecasting for a busy pit/quarry could involve hundreds of customers along with a wide array of products (I've seen as many as 30). Getting any sort of an accurate forecast from a construction client is a challenging task. Project schedules change quickly with so many variables. Then try to line it up with a production schedule that can change daily. Some locations also cannot produce year round due to cold weather or other regulatory constraints. I have always found that building a robust forecasting process can take YEARS, as it requires alot of buy-in internally, but also selling it to customers and getting their help.

In the field of spare parts, with the help of forecasting methods and with the help of artificial intelligence and machine learning, we select the best forecasting method with the lowest amount of forecasting error in the records, and with the help of other inventory control indicators and the definition of control variables, we try to prevent sedimentation. And prevent capital sleep. Methods such as defining the optimal inventory level in ABC groups, defining the appropriate service level for ABC groups

1. Utilize Demand Forecasting: Forecast future demand to determine optimal inventory levels and avoid excess stock or stockouts. 2. Implement Lean Inventory Practices: Embrace strategies like just-in-time (JIT) inventory and lean manufacturing to minimize inventory holding costs. 3. Set Reorder Points: Establish reorder points based on lead times, demand variability, and service level targets to maintain optimal inventory levels. 4. Implement Vendor-Managed Inventory (VMI): Collaborate with suppliers to optimize inventory levels and streamline replenishment processes. 5. Utilize Inventory Management Software: Invest in software solutions to track inventory levels, monitor demand patterns, and automate replenishment processes.

1. Analyze Carrying Costs: Identify and reduce costs associated with holding inventory, such as storage, insurance, and obsolescence. 2. Optimize Order Quantities: Use economic order quantity (EOQ) or reorder quantity models to minimize ordering and carrying costs while maintaining service levels. 3. Implement Cost-Effective Storage Solutions: Optimize warehouse layout, use vertical space efficiently, and invest in automation to reduce storage costs. 4. Minimize Stockouts and Excess Inventory: Implement robust demand forecasting, inventory planning, and replenishment processes to minimize costs associated with stockouts and excess inventory.

Implement Quality Control Measures: Establish quality standards and processes to ensure the accuracy, reliability, and safety of inventory items. Conduct Regular Inspections: Perform regular inspections and audits of inventory to identify and address quality issues promptly. Train Staff: Provide training and resources to employees involved in inventory management to ensure proper handling and storage of inventory items. Collaborate with Suppliers: Work closely with suppliers to ensure the quality of incoming inventory items and address any quality issues proactively. Utilize Technology: Leverage technology such as barcode scanning, RFID tagging, and inventory management software to track and manage inventory quality effectively.

Provide real-world examples of companies that have successfully optimized their inventory management processes and achieved significant improvements in efficiency, cost savings, and customer satisfaction. Highlight key strategies, challenges, and outcomes of each case study to illustrate best practices and lessons learned in inventory optimization.