DEMAND PLANNING – How To Forecast for Chinese New Year

Minimize disruption from supplier closures with our handy infographic

As Covid-19 rumbles on, supply chain professionals now have another challenge on their horizon: Chinese New Year.

In 2021 Chinese New Year Festival will be celebrated February 11-17. Far East Suppliers will halt their production for this annual national holiday, SO THE TIME TO START PLANNING IS NOW!

Suppliers are still playing catchup from the pandemic. Because of this, backorders and customer demand remain volatile which means extra steps must be taken this year to prepare for what lies ahead.

A SIMPLE GUIDE TO FORECASTING FOR CHINESE NEW YEAR

To help you prepare for supplier closures, we have put together a simple infographic.

By following these milestones, you can ensure you have taken all the necessary steps to:

• Build robust demand forecasts
• Align sales, operations & the wider business
• Secure availability without over investing in inventory

Learn how to forecast for Chinese New Year with Slimstock

CLICK HERE for the full size How To Forecast for Chinese New Year infographic.

Slimstock has been helping companies like yours lower inventory costs while increasing customer satisfaction for 25 years. Our inventory management software is used by 1,000+ customers worldwide to free up capital and simplify the ordering process. Chat with one of our friendly customer service reps today to learn how we can help optimize your inventory.

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Excel doesn't work well for forecasting and supply planning choose Slimstock instead!

5 Ways to Tell You’ve Outgrown Excel

How to know when your business is ready to upgrade from spreadsheet forecasting and ordering

For many business folks, Excel is synonymous with ordering inventory. It’s often the go-to choice because of its familiarity and seeming ubiquity. There’s good chance that the computer you’re reading this article on right now has Excel installed, or access to something similar from Google or Open Office.

But as businesses grow and your inventory levels and complexity increase, Excel stops helping and instead makes your life more difficult. Worse, the inefficiency of ordering with a spreadsheet is costing you money through excess stock and wasted time.

Salesforce reports that almost 90% of spreadsheets have errors in them. So, while spreadsheets can seem like the “free” alternative to dedicated order management software, they’re anything but.

While you consider that, here are 5 ways to tell you’ve outgrown Excel -

1. Formula Errors Are Costing You Money

When you use Excel, formula errors are always at your fingertips. And if the number of cells in your spreadsheet is heading north of 50K – and we’ve seen far worse than that – then your chances for errors increase exponentially.

Unlike Excel, getting accurate results from Slimstock doesn’t depend on entering both the data AND the formula correctly. With Slimstock, the math is handled in the backend for you, ensuring accurate results. Forecasting and sales planning software is built for seamless upgrades and data migration.

Instead of answers, spreadsheets just raise more questions, like -
1. Will the macro you rely on work the same in latest version of Office?
2. Are hidden cells you forgot about being copied correctly to a new workbook?
3. Is having to worry about potential problems like this really better than simply avoiding them altogether?

JP Morgan Chase once famously attributed a mistake that cost them $6 billion to errors made in Excel. While the spreadsheet mistakes you see might not be enough to finance a lunar mission, they definitely add up (not unlike unsold inventory in your warehouse that was accidentally ordered due to a spreadsheet mistake).

2. You Don't Know Who Changed the Spreadsheet

Even if you do detect the mistakes that your spreadsheets are 90% likely to have, how do you know where they came from? Because it only takes one error to ruin an entire workbook, even efforts to doggedly ensure responsible use can be quickly undone.

The core of this problem is that Excel simply wasn’t designed as a collaborative piece of software, so trying to use it as one will always lead to difficulties. Even if it is possible to develop and implement a system of documented changes, the time you spend administering it can no doubt be better spent elsewhere.

Instead of opaque or byzantine usage tracking methods, Slimstock makes seeing who made changes to your data a simple and transparent process. By providing an automatically logged audit trail, you’ll always know who’s making changes to your books and when.

3. You Spend Hours on Reporting

If there’s any benefit to using spreadsheets for complex ordering and inventory tasks, it might be the brief sense of accomplishment you get from producing useful information out such an unwieldy grid of data. That’s a meager reward. And, time spent cleaning and validating data before turning into charts is time you’re not spending on improving customer experience or having dinner at home.

As anyone who’s done it knows, even if you get good at creating reports from spreadsheets, the monotony of it is unbearable and unnecessary. Slimstock quickly generates helpful, high-level reports like a Profit & Loss sheet to help with business planning. It is also equipped with a customized reporting dashboard to give you real time insights on key metrics that are always available, instead of having to create them by hand.

Ordering from a spreadsheet leads to frustration and errors4. You're The Keeper of the Spreadsheet and You Need To Go On Vacation

Almost every office has The Keeper of the Spreadsheet. It’s the person you tell when the data needs to be updated, because only they know the password and it’s a closely held secret.

What’s the only thing worse than this situation? When you’re The Keeper. No one’s doubting your ability to administer spreadsheets, but what happens when you need to go on vacation? Even if you have named your Assistant Keeper, do you really trust them? Or what happens if the Keeper quits, or gets fired, or simply changes positions within the company?

This is what’s knowns as a single point of failure. These are a serious liability for any business because the eventuality of them failing isn’t “if” but “when”. Slimstock removes the risks from single points of failure by being purpose built to allow multiple users different levels of access as assigned.

5. You’re Falling Behind On Ordering Best Practices (And It’s Costing You Money)

Is the fact that it works most of the time the best thing you can say about your ordering spreadsheet? If so, then it’s unlikely you’re making gains in efficiency. Slimstock is able to save companies money because it identifies inefficiencies, reducing stock levels by up to 30%. It does this by constantly updating with best practices and new features, such as seasonality, weather factors and machine learning.

What would you do if, tomorrow, your finance team asked you to lower inventory by 30%? While it may be possible to make quick gains in the short term, without a coherent strategy these attempts ultimately end up sacrificing fill rate and CSAT. Slimstock is a system developed by people who understand inventory management.

Since 1993, Slimstock has proven itself as the market leader in inventory optimization. With Slimstock you will get advanced forecasting and supply planning features to upgrade your ERP. Thousands of companies around the world trust Slimstock to lower inventory levels, increase service levels and deliver fast implementation and ROI. Our team of expert consultants and responsive customer support will create and implement a customized inventory management strategy to help you achieve your goals. Chat with one of our friendly customer service reps today to learn how we can help optimize your inventory.

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16 Tips to Reduce Excess Stock guide

16 Tips to Reduce Excess Stock How-To Guide

Set accurate service levels, refine stocking strategy, improve vendor management and more with our helpful how-to guide

Most businesses hold some excess stock. This likely includes yours (otherwise you wouldn’t need this guide!). But do you know how much surplus you actually have? Could you put a dollar amount on it? How about a close guess?

If you answered with a shrug or an amount that could be off by several thousand dollars, then it’s likely you’ve been aware of the problem for a while. Why do businesses ignore their excess stock? Because getting rid of it is hard.

Thankfully, you don’t have to do it alone. Slimstock has over 25 years or experience in helping companies optimize their inventory, and this guide will get you many steps closer to achieving that goal for your company.

click here to download 16 tips to reduce excess stock guide

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Slimstock Forecating Fundamentals How To Guide

FORECASTING 101: 11 Forecasting Fundamentals Every Supply Chain Pro Needs to Know

FORECASTING 101: 11 Forecasting Fundamentals Every Supply Chain Pro Needs to Know

Forecasting technology is always growing more sophisticated, or at least more complicated. At the same time, your customers’ expectations for service level and fulfillment are more demanding than ever.

Newer technologies - like complex algorithms, machine learning, and AI – are often touted as delivering better forecasts. However, without a basic understanding of forecasting fundamentals, you won’t be able to apply those tools correctly.

So, whether you’re still manually updating inventory or are a seasoned supply chain pro, here are 11 forecasting fundamentals you need to know.

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What is Inventory Optimization?

INFOGRAPHIC – What is Inventory Optimization?

Are your warehouse shelves spilling over, or overly bare? Learn how to spot stock problems and see how inventory optimization with Slimstock can save you money and make unhappy coworkers happy again!

Simplify your life and keep coworkers and customers happy with inventory optimization from Slimstock

Slimstock has been helping companies like yours lower inventory costs while increasing customer satisfaction for 25 years. Our inventory management software is used by over 900 customers worldwide to free up capital and simplify the ordering process. Chat with one of our friendly customer service reps today to learn how we can help optimize your inventory.

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Inventory Allocation

Inventory Allocation: How Retailers Can Find the Perfect Balance

Retailers face a real conundrum. On one hand, everything from the costs of raw materials to commercial retail space is always getting more expensive. And on the other, customers can quickly check dozens of options for any purchase so retailers must ensure that their traditional brick and mortar stores add value to the overall shopping experience. For anyone looking to minimize operating costs while maintaining margins, inventory allocation is one area that simply cannot be overlooked!

Succeeding in today’s complex omni-channel environment means striving to achieve the perfect inventory allocation across multiple locations at a time when it has never been more difficult or costly. With pressure from customer to provide exceptional choice and availability, how can retailers achieve a balanced inventory allocation across all channels?

Inventory Allocation Explained - Why You Need a Strategy

Put simply, inventory allocation encompasses all of the decisions made around how inventory should be distributed throughout your supply chain. The problem for many retailers is that their network is comprised of a complex mix of centralized and decentralized locations and channels. Consequently, generating and implementing an optimal inventory allocation can be a truly mind-boggling exercise.

In complex retail environments - with many warehouses, stores and multiple e-commerce channels - it is vital that the retail allocation strategy is both well considered and communicated effectively across the wider business. This is important because even if you have dozens of retail stores, the allocation of available inventory to any one of them can have a profound impact on overall sell-through rate and waste.

What Does Ineffective Allocation Strategy Look Like?

Before we cover how to determine the best strategy for your business, let’s first take a moment to look at what bad strategy - or worse, no strategy - looks like. (Note – If any of this hits too close to home, you should give us a call!)

When allocation strategy is not well aligned with overall business strategy, this can have a huge impact on the performance of the business as a whole. Some of the resulting issues are very visible, such as empty shelves at some locations while others have cluttered aisles and backrooms bursting with stock. Poor allocation can also have a profound impact on sales and margins as the business is hit with avoidable supply chain costs and missed sales opportunities.

Tell-Tale Signs of an Effective Vs Ineffective Allocation Strategy

Optimized Allocation Strategy                                    Ineffective Allocation strategy

😊 Consistently high levels of availability                ☹ Cluttered stores

😊 Minimized inter-store transfers                            ☹ Excess stock across the chain

😊 Maximum product sell-through                            ☹ Availability issues across online channels

😊 Days of stock on hand minimized                         ☹ High rate of in-store stockouts

😊 Excellent customer satisfaction                             ☹ High rate of markdown

Inventory Allocation Rules: What Parameter Should Be in Place?

Every business is different. As a result, the parameters for effective stock allocation must be built with the intricacies of the operation in question. For example, in environments where demand is steady and easy to predict, allocating all the stock may be the best way to minimize supply chain costs.

However, in industries where the demand per location is highly uncertain, e.g. fashion, allocating 100% of the available inventory on day one could be a risky decision. Instead, it may make sense to allocate 50% of the available inventory to stores in the first instance and then allocate the rest to the best performing locations further down the line. Therefore, the inventory allocation rules must reflect this.

When determining inventory allocation rules, the following are examples of things which business leaders may want to consider:

• The risk of stock outs Vs. the risk of waste
• Ease & speed of distributing inventory from DCs to stores
• Available warehouse space at the DC
• Available shelf space in-store
• Cost to re-distribute stock
• Level of available inventory

The movement of inventory between customers and suppliers

 

Inventory Allocation in a Multi-Channel Environment

Though all retailers are different, there are a number of points to consider so that your inventory allocation will satisfy both the demands of the customer as well as deliver value to the business.

1. Get your allocation right first time, every time

For many retailers, the initial allocation causes the biggest headache. This is not surprising given that a poor initial inventory allocation is one of the most common avoidable causes of obsolescence and waste. When rolling out a product to stores, the temptation is to allocate all inventory from day one. However, there is little point in allocating products to a store where they will never sell through.

Take, for instance, the inventory allocation of women’s shoes: demand will always be higher for size 6. So, while it makes sense to allocate these to stores, what about extremely large and small sizes?

Since these products are statistical outliers demand for them at any given store is likely to be far lower, and therefore the risk of excess and obsolescence is far higher. Consequently, it makes more sense to allocate outlier products to a centralized location in order to fulfill demand via the webshop or push to stores when required.

2. Presentation is everything

When it comes to the initial allocation, less is more. That said, there is always a minimum inventory amount that should be allocated per store. The goal here is to provide your stores with a sufficient amount of presentation stock to launch a new product as well as cover demand until the inventory can be replenished.

However, there is still a risk that the level of presentation stock is excessive. Presentation stock is typically driven by the planogram in place, which is why we highlighted the importance of communicating your allocation strategy throughout your company at the beginning of this piece. In this case, it’s vital that supply chain teams are well aligned with the visual merchandising team to minimize the risk of excess and obsolescence.

3. Make automated replenishment work for you

As stated in Point 1, it is not advisable to allocate all of your inventory straight away. Instead, retailers should rely on their replenishment processes to regularly top up in-store inventory levels. But how do you know when it’s the right time reorder for a new item?

Establishing automated replenishment rules for new items can be tricky given the dearth of item-specific historical sales data. Instead, set initial automated reorder quantities at a level equivalent to similarly selling items at that location, and institute weekly manual reviews. By doing this, you can be assured of a specific minimum inventory level, with the option to order more as needed using the manual review. As adjustments are made after the roll-out, the review time-frame can be pushed to bi-monthly and then monthly once more data is available. While this process is more labor intensive than standard automated replenishment it works to ensure that stock is allocated correctly while also providing that reassurance that a base level of product will always be available.

Businesses must grab every opportunity they can to improve margins. By implementing a cohesive allocation strategy, retailers can realize increased sales from levels of availability across the entire supply chain.

Slimstock has been helping companies like yours lower inventory costs while increasing customer satisfaction for 25 years. Our inventory management software is used by over 900 customers worldwide to free up capital and simplify the ordering process. Chat with one of our friendly customer service reps today to learn how we can help optimize your inventory.

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Monthly or Weekly Forecasting Which one is right for you

Monthly vs Weekly Forecasting

Which forecasting method is best for your business?

The goal of Slim4 - Slimstock’s inventory optimization software – is to predict the future. Specifically, how much of an item you’ll need to meet customer demand. Predicting the future is hard work even using historical data. With our ever more interconnected world, the number of data points available is almost limitless, so the challenge is getting the right data and using it in a way that increases predictive accuracy.

When preparing to order inventory, two approaches are typically used – monthly forecasting and weekly forecasting. But which method works best? The temptation to default to weekly forecasting can be understandable because on the surface it can seem timelier and thus more accurate. If 12 data points are good, then 52 should be better, right? This isn’t always the case.

In 25 years of helping customers get the right product in the right place at the right time, we’ve seen that most products can be predicted and ordered more accurately using monthly forecasting.

Monthly Forecasting

In plain English, monthly forecasting means that sales data is captured daily and bucketed into months to produce a forecast. Similarly, weekly forecasting involves bucketing daily sales into weeks to create a forecast.  This creates 40 more forecast periods in a given year.

Monthly forecasts work best for most products because they tend to generate lower forecast errors. While there is variation in how many units are sold week to week within a monthly forecast, if we’re doing our job correctly, you’ll still have the right amount on your shelves whether it’s 1st, the 15th or the 30th.

The three primary reasons monthly forecasting is more reliable are -

  • Monthly forecasting’s larger bucket better absorbs changes in customer order timing. If a customer who normally orders a part from you in the first week of a month instead orders it in the second, this can disrupt your order data.  However, this potential disruption is nearly four times as likely to be absorbed by monthly forecasting, leaving your order data unaffected.
  • Monthly orders reduce the number of zero entries in your data, meaning the law of averages works for you. If a customer places an order with you for 100 units every two weeks, it results in a simple average of 50 units per week. But, the forecast error relative to this average will always be wrong because the order quantity is never 50, it’s either 100 or 0. Taking a monthly view of this order pattern makes correct forecasting easier because it shows consistent usage with fewer zero entries.
  • Monthly timeframes handle seasonality better. Months are predictable – they’re in the same order every year. Weeks, however, are a little squirrely – they can move around +/- 4 days in either direction. The relative unpredictability of weeks makes them more difficult to use when factoring in seasonality, especially if there are only a few years of data to base forecasts on. Monthly timeframes more reliably allow general tendencies to develop and be represented in your order data.

Irregular customer behavior can be absorbed by monthly ordering

Weekly Forecasting

Even an accurate forecast amount isn’t much good to you if it doesn’t show anticipated demand over the right period of time. If this happens, you’ll have stockouts and falling customer service goals will be soon to follow.

As stated earlier, weekly forecasting requires more effort than monthly, but is appropriate for items that have an observable repetitive pattern of usage within each month. 

Here is an example of an item that meets this criteria.

Sales pattern of an item that meets weekly forecasting criteria

With 60% of sales coming in the first week of the month, this product is good candidate for weekly forecasting.

Items with short lead times and consistent sales work best for weekly forecasting. By identifying these opportunities, the product can be ordered close to when it is needed, which helps improve inventory turnover and the overall profitability of the company.

Other advantages to weekly forecasts are:

  • Compatibility: If your customer is communicating with you in terms of weekly forecasts or weekly Point-of-Sale (POS) information, generating your own forecasts in kind can provide an invaluable direct linkage with them.  Getting that direct linkage with data closer to the retail customer may outweigh any potential internal forecast accuracy improvements.
  • Medium Volume Items: If you are dealing with medium volume items, a weekly approach produces more accurate trend lines and better reflects shifts in demand.

Slimstock’s implementation team will help you identify which type of forecasting is best for your product array based on historical sales data. For items that fit weekly forecasting criteria, Slim4 distributes volumes from monthly forecast data to the appropriate week in the month using historical pattern references or defined business rules. This approach delivers the advantages gained from monthly forecasting as outlined above, while accounting for observable specialized demand needs within the month.

Monthly or weekly forecasting - the best way to decide which approach is right for you is to schedule a demo of Slim4 with our inventory experts. They will run your ordering data through our proven inventory optimization software to show you real savings opportunities that have delivered post-implementation ROI of 6-12 months for most customers.

Schedule your Slim4 demo today

Slimstock has been helping companies like yours lower inventory costs while increasing customer satisfaction for 25 years. Our inventory management software is used by over 900 customers worldwide to free up capital and simplify the ordering process. Chat with one of our friendly customer service reps today to learn how we can help optimize your inventory.

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3 Ways Excess Stock Can Put The Brakes On Your Profits

3 Ways Excess Stock Can Put The Brakes On Your Profits

If you're rolling a new hybrid CUV off the assembly line or chrome-plating exhaust tips for the aftermarket, the automotive industry runs on parts. In 25 years of working with manufacturers and distributors, we know that demand planning and inventory optimization are evergreen topics in the auto industry. Reducing excess stock can be a major speed bump because it requires coordinating management, finance and supply chain teams, and this is double true if you’re ordering from a spreadsheet.

While there are a few specific segments of the auto industry where excess inventory is unavoidable, it’s incredibly rare to find a business where no reduction in stock is possible. Instead, for the vast majority of organizations excess stock is typically involuntary and unwanted. But what are the tell-tale signs that excess stock is putting the brakes on your business’ performance?

Here are three of the most common symptoms of excess stock -

1) There Is A Pile-Up In the Warehouse

For many auto industry companies, excess stock is physically visible. In fact, this can often be the very first thing employees see when they arrive at work. Put simply, the warehouse is not big enough.

Working in the auto industry leaves companies prone to excess stock that can pile up due to the number of and variety parts needed. They are more likely to deal with -
• Large product assortments
• Irregular demand patterns
• Slow moving parts
• High service level requirements
• Product suppression/substitutes

Irregular demand patterns and slow-moving parts require different forecasting and inventory models than used by common inventory and forecasting systems. Additionally, as new model years are released, being able to utilize historical demand appropriately is important.

If allowed to persist, the issue can become so severe that businesses require outside storage or even investment into new facilities. A further consequence is that the warehouse processes appear cluttered and lack serenity.

2) Excess Stock is Guzzling Working Capital

The discomfort of carrying excess stock is often felt by the finance department. One method used by financial managers to analyze inventories is through liquidity, i.e. evaluating the company’s ability to honor obligations using the money currently in the bank plus monies to be received, but not including the sales of current inventory.

Having too much capital tied up in stock often leaves businesses illiquid, forcing them to increase their reliance on debt. If excess stock is hampering liquidity, the financial manager often insists that inventory be reduced.

By the time you’re in this situation, it is often too late to perform a thorough inventory analysis to see which parts should be reduced. Optimizing stock isn’t just lowering levels of inventory, it’s having the right part in the right place at the right time. Reducing stock in a way that doesn’t adhere to an overall inventory strategy ultimately results in quick changes that achieve the short-term effect of lowering stock, but run the risk of lowering customer service through stock-outs.

3) Unsafe Levels of Safety Stock

When looking for the source of excess stock, inventory policies are a good place to check. After all, even if a company hits their sales forecast, poorly aligned policies can still result in crippling excess stock.

The policy associated with safety stock is one of the main causes of excess stock. A good working definition of safety stock is “a level of extra stock that is maintained to mitigate risk of stock-outs due to uncertainties in supply and demand.”
For example, if a company expects to sell 100 units of a specific type of headlight, you can choose to keep 110 units in stock to absorb any fluctuations in demand. These additional 10 units are the safety stock.

The big question is how to calculate safety stock. A typical way is to use the standard deviation of historical demand, usually over the past 12 months. This works well for items with little variation. However, for items with positive /negative growth, seasonal trends, and irregular or sporadic demand this method can be unreliable.

For example, imagine that you have an item that has an average demand of 141 units/ month and a standard deviation of 91. You want a service level of 95% (z = 1.645), and the item’s lead time is 15 days. Using a simple formula for standard deviation, the safety stock would be 106 units.

The flaws in this method become clear when the sales forecast points to 95 units, and the recommended safety stock is calculated to be 106 units, for a total of 201 units. Holding nearly 2 months of demand for an item in inventory isn’t ideal, but many companies do so because they lack the resources to avoid calculating each item separately.

Curbing Excess Stock

Individual inventory analysis of each item can keep safety stock levels where they need to be. However, many auto industry businesses offer thousands of SKUs, so safety stocks are not reviewed often enough. We have seen many businesses that evaluate safety stock every six months or annually, which often leads to costly inefficiencies.

This is one of the main reasons why there are large volumes of auto industry inventory that do not turn.

How can you curb excess stock issues? In the space of a week, an X-Ray Analysis from Slimstock will outline the makeup of your inventory and help you to understand:
• The value of excess stock within your business
• What percentage of this excess could be reduced (and what percentage will inevitably need to be written off)
• What causes the excess stock in the first place
• How to correct these issues in order to reduce the excess stock and prevent it from resurfacing

Slimstock has over 950 customers worldwide, and our inventory experts have performed thousands of detailed analyses for businesses throughout the automotive industry and others.

In 25 years of operation we have achieved a 96% customer retention rate. Let us help you tame your warehouse today!

If your not ready to call us today, check out our article on trimming your excess inventory.

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How To Trim Your Excess Inventory in 4 Simple Steps

Excess stock is bad for business. It takes up valuable warehouse space and costs you a lot of money while it becomes obsolete. And, 10% of the items in your warehouse will never be sold, according to Slimstock inventory analysts.

These items are unlikely to bring in revenue, so why are you holding on to them?

ELIMINATING EXCESS STOCK TAKES COURAGE!

The problem is that removing these items from your operation is easier said than done. Given that you have made a financial investment in these products, accepting that they no longer have value for your business can be a hard pill to swallow.

Writing off obsolete inventory will come at the cost of your margins. This won’t amuse the finance director or the board, but it is totally necessary. The original investment in these items has already been lost, and continuing to let them take up space in your warehouse will only make these losses worse.

4 Steps to "Painlessly" Remove Excess Stock

So, what can you do to eradicate surplus inventory from your operations while still keeping the potential financial impact to a minimum?

We at Slimstock have outlined 4 simple steps to help you eliminate the excess stock that is holding your business back. By following these tips you will be able to minimize inventory costs and free up working capital, both of which will be music to the financial director’s ears!

Step 1) Physically Remove the Stock

Before you can take excess stock off the books you first have to take it out of your warehouse. You could store it in a container or an unused basement closet - it doesn’t matter so long as it’s out of sight.

Although it might seem odd to effectively “hide” obsolete stock, this step is necessary. As long as it’s in the warehouse, this stock is taking up valuable space that could be used by other items that are actually going to make your business money.

Step 2) Remove from the Administrative Process

Once you have identified the excess stock, the last thing you want to do is order more. Ensure that the obsolete articles are removed from your ERP as well as any other transaction system. If that’s not possible, at the very least make sure that purchase and sales orders for such items can no longer be placed.

Step 3) Financial Devaluation

Now comes the hardest (but unavoidable) step: re-valuation of the stock. Although painful, you cannot afford to postpone this. If you do, sooner or later you will have to go back to the same old conversations with your sales and finance teams. And as we said at the start: obsolete stock isn’t making your business money, instead it’s costing you more the longer it remains.

Step 4) Damage Control

What do you do with your excess stock once it has been identified and removed, and the appropriate administrative and financial actions taken? It may be possible to find a buyer for it. Some of our customers have had good luck with identifying the last customer who ordered it and making them an offer they can’t refuse. You can also ask the supplier if they offer a buy back, or want to take their old stock back. Depending on your business, another idea is to see if it can be donated to a charity or non-profit.

You might be asking yourself at this point: “Why not take these actions while the stock is still in the warehouse?”

Based on our experience, trying to remove obsolete stock while it remains on premises often results in it remaining on your balance sheet at the end of the year.

Prevention is the Best Cure!

After going through the often difficult process of removing your existing excess stock, the last thing you want to do is the same thing again in 6 months. Ask yourself how the stock became obsolete – was their problem in forecasting that led to delays? Was demand or availability affected by seasonality?

If you’d like a hand in figuring this out, Slimstock’s focus on optimizing stocking policies, services levels and product lifecycles has helped hundreds of businesses just like yours put in place the right processes, tools and knowledge to minimize the risks of excess.

Schedule your Slim4 demo today

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Use Slimstock's revised EOQ formula to find optimal order quantities

The EOQ Formula: From Theory to Practice in 7 Easy Steps

Unraveling the Secret of Optimal Order Quantities

How to Use Slimstock’s "Economic Order Quantity in Practice" Model to Optimize Inventory In 7 Easy Steps 

Inventory is unavoidably one of the largest single assets on your balance sheet. In the manufacturing industry, around 37% of total costs are inventory, while for retailers and wholesalers they are more than 50%. No company wants excess inventory, but you need to have enough in stock to deliver customer service. Simply put, you can’t sell what you don’t have.

To help you find the optimal order quantities for your business, this paper discusses an indispensable inventory management formula: the Economic Order Quantity, or EOQ.

eoq

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