To improve the prevention of inventory obsolescence, it is essential to take into account factors that are unknown or not associated with the problem. For example, more than 25% of obsolescence comes from poor management in the introduction of new articles.
In the previous articles, we talked about Client focussed business strategy, Supply Chain According to business strategy, how to create an Assortment Strategy and how to Execute this Assortment Strategy. If you havent read them, click on the titles above to go to each article. Today’s article refers to the dynamics of assortment, the introduction of new items and the prevention of inventory obsolescence.
INTRODUCTION OF NEW ITEMS
Obsolescence levels are usually associated with poor inventory management. However, more than 25% of this is generally produced exclusively after calculating the first purchase. When the introduction of new articles is planned, it is the sales and sales area (sometimes in conjunction with the supplier) who make it. They estimate what items will be released, when and in what quantities. Therefore, the first purchase is usually not the responsibility of the supply team. However, they can provide valuable information when it comes to rating a release as a success or failure.
Not all items that are added to the assortment will become a sales top. Even in many of them, the actual sales will not reach the expected ones. For this reason, it is necessary to establish a sound tracking system and thus react quickly. Some possible changes in plans can be the cancellation of purchases or even returns to the provider. It is precisely at this point that the planning department can help to recognize cases in which the sale is not aligned with the projections. It may be necessary to rethink strategies for the introduction of new articles.
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THE PREVENTION OF INVENTORY OBSOLESCENCE
Regardless of the management that can be done to avoid increasing the level of current obsolescence, establishing a mechanism for evaluation of releases is a good option for the prevention of inventory obsolescence. Considering the obsolescence generated can be an additional impulse so that the projections of the new articles are from the beginning as realistic as possible.
Now, it must be assumed that whenever a new article is introduced, a risk is being taken. If the company aims to innovate its articles, this decision responds to a characteristic of the way of doing business and, therefore, innovation translates into risk.
In the case of Apple, it bet 100% on the innovation of its iPhones and products in general. They must continuously withdraw and add new products to the market.
DYNAMICS OF ASSORTMENT
It is well known that the line up of companies is usually dynamic. While some elements are removed from the active assortment, others enter it. Making a correct phase in and phase out becomes vital when it comes to avoiding inventory obsolescence. Estimates of new products may only be a statement of intent and plans will not necessarily be met. If all the intervening parties of the company work together, it will be easier to evaluate the results obtained. In this way, generate learning curves that are the engine of an improvement in the prevention of inventory obsolescence when managing the introduction of new items.
Anyway, this does not mean that you can not effectively make proactive management in the prevention of inventory obsolescence: if you have the right systems to obtain visibility regarding the status of the inventory and is complemented with a functional performance analysis, from the sale of new items, alarms can be triggered that allow reacting as soon as possible to a probable risk of obsolescence and, at the same time, prevent the problem from growing and growing …
Are there formal mechanisms for evaluating the performance of new products in your company?
Who determines the forecast of a release and the amount of the first purchase?
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