Retailers are increasingly faced with multiple sales channels and large product ranges. But which stock should be held where in order to oﬀer the best level of customer service? Peter Bocken, a retail expert from Slimstock, shares ten inventory tips for taking control of an ever-expanding product range and keeping a tight rein on costs.
Inventory management is in essence very simple. It revolves around two questions: how much should you order, and when? What makes inventory management so complex is that everyone views it diﬀerently. A ﬁnancial director looks at the capital costs and obsolete stock, for example, whereas a logistics manager often thinks in terms of the number of pallet locations and order lines. For a sales director, however, inventory means more revenue, more proﬁt and more satisﬁed customers. Adding to the complexity is the fact that the ‘traditional’ supply chain no longer exists. Rather than all goods going from manufacturer to wholesaler to retailer and then on the consumer, many of today’s supply chains have become hybrids.
So where should you hold your stock in order to oﬀ er the best customer service? With expanding product ranges, more sales channels and more inventory points, The reality of inventory management has become far more challenging. Based on our experience of working with over 750 businesses around the world who use our inventory optimisation software, we have prepared these top tips:
Tip 1: From strategy to execution
Translate your company strategy into appropriate business rules and associated automatic scenarios. For example, a high-end department store such as Harrods and a fashion discounter such as Primark both sell white T-shirts. However, they pursue very diﬀerent inventory and procurement strategies.
Tip2: Statistics never lie
Utilise (big) data! This enables you to use statistically reliable models to arrive at an accurate forecast and (often even more importantly) to calculate the appropriate level of buﬀ er stock on a daily basis, even in the case of extremely large product ranges.
Tip 3: ABC for the right focus
In a large long-tail assortment it is impossible to pay equal attention to each and every product. Sharpen your focus by frequently performing a thorough forecast-based ABC/ XY analysis. Which products add the most value in terms of proﬁt, revenue and/or numbers of customers?
Tip 4: To stock or not to stock?
Bear the three-step model in mind. Does the item ﬁt in the product range? Do you need to keep the item in stock? If so, how many units? The second step is the most important one. Much depends on the customer’s willingness to wait and the supplier’s back-oﬃce setup.
Tip 5: Channel differentiation
Physical stores, web shops, online platforms – retailers have to manage ever-more sales channels. With expanding product ranges comes fragmentation of demand. Optimise your proﬁt margins by allocating the right products to the right channels.
Tip 6: Product life cycle management
Keep a close eye on the life cycle of each product. Each phase requires a diﬀerent owner within the organisation and a diﬀerent product management mechanism. Align your inventory and procurement strategies accordingly.
Tip 7: Management by exception
It is impossible to check every individual SKU manually every day. How many exceptions are you willing and able to manage? What do you want to automate, and which decisions could/should a planner still be able to make? Make sure you achieve the right trade-oﬀ between eﬃciency and eﬀectiveness.
Tip 8: Collaboration
Collaboration is key, both internally and externally. Share information with your suppliers to improve performance, and don’t wait too long to share information with Marketing in order to resolve inventory-related issues and potential stock shortages as eﬀectively as possible.
Tip 9: Step-by-step model
Professionalise your supply chain one step at a time, ensuring you lay down a ﬁrm foundation. The Slimstock modular model supports a structured approach.
Tip 10: Provide continuous training
Inventory management is like A top-ﬂight sport. Our final inventory tip is to continually invest in your people to improve their competencies and keep them at your company for longer!
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With the Tour de France approaching, team GB continue to inspire cyclists all over the UK. With Team GB’s triumph over the last few years, it seems more and more of us are getting back on the saddle. However, as Brexit jitters take hold and the Government forges ahead with a major initiative to double the uptake of cycling by 2025, the next few years will be no easy ride for the bicycle industry! To explore the challenges that lie ahead, we have embarked upon an epic tour of the bicycle supply chain.
With so many factors to contend with, what challenges should retailers, wholesalers, and manufacturers prioritise in order to keep up with the huge anticipated growth in the industry?
As part our epic tour around the bicycle industry, we have identified the biggest hurdles that businesses across the bicycle supply chain must overcome in order to stay ahead of the pack. From managing inventory across a growing number of channels to responding to ever-more demanding customer expectations, in order to endure the challenges that lie ahead, businesses must strive to ensure their operations are as efficient and effective as possible.
Starting from the perspective of retailers and etailers, our tour begins with the challenging nature of managing complex retail environments before factoring the impact of shirnking product lifecycles. The next stage looks at the uphill struggle faced by wholesalers and distributors. The final leg of our three stage tour encompasses explore the difficulty manufacturers have in forecasting demand.
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To help summarise the challenges faced by the bicycle businesses, we have put together a route map of the bicycle supply chain. This map Complete the form below to download a full-size version of our clever infographic today!
As dog enthusiasts start preparing for Crufts 2020, the world’s greatest dog show continues to inspire animal lovers all over the UK!
With more and more of us aiming to win best in the show, the weekly spend on pet accessories and food in the UK has risen by an impressive 31% in just two years. While consumers cut back on everything else, it seems that pet owners still want to ensure their beloved animals receive only the best.
However, to keep dog lovers and their pampered pooches happy, businesses across the pet sector need to remain in the top paw-sition when it comes to customer satisfaction. But to stay ahead of the pack, businesses have to invest in their supply chain.
After all, from managing inventory across a growing number of channels to responding to ever-more demanding customer expectations, retailers, wholesalers & manufacturers and businesses must strive to ensure their operations are as efficient and effective as possible.
Achieving supply chain excellence is no walk in the park
Supply chain teams have to jump through lots of hoops to ensure a successful supply chain. However, by helping businesses to optimise their approach to forecasting, demand planning and inventory management, we help businesses across the pet sector to maximise the performance of their operation.
To highlight the key areas businesses our team of experts focus on, we have put together an inventory management agility course. In this supply chain infographic, we explore how the kennel club's favourite brands realise their full potential with our best of breed solution, Slim4.
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Supplier closures are disruptive at the best of times. However, unlike other factory closure periods, the summer season can last for several months and suppliers can shut down at any point throughout this time. Contrary to popular belief, Mediterranean countries are not the only ones where it is common place for factories to close down at some point for summer holidays: for suppliers based in Germany, France and even the UK, there is a good chance their operations could be brought to a standstill for at least a couple of weeks. Thus, the potential impact of summer supplier closures cannot be understated!
Failure to plan is planning to fail
In the face of supplier closures, it is important that you plan well in advance. Failure to do so may mean that you are left with an insufficient level of stock to meet demand. The obvious solution would be to buy extra stock to cover you while your suppliers are out of action. However, is this really the best approach?
After all, if a large proportion of your inventory is at risk of being affected by supplier closures, you may have to make a huge investment in order to hold several extra months’ worth of inventory to cover demand during this period.
Breeze through your supplier disruptions
From aligning purchase decisions with the business objectives to actually executing the purchase orders with suppliers, ensuring your operation runs smoothly requires some serious thought. Download our concise guide to managing supplier closures and discover how you can bring peace to what can be an incredibly volatile time for your business!
The Slimstock Research Centre is constantly pushing the boundaries of inventory management. As excitement around AI & machine learning grows, our team of experts are actively researching how this technology can be applied to overcome the supply chain challenges business face today!
In this infographic, we explore how machine learning is being applied to specific inventory management functions to develop the next generation of supply chain tools!
Forecasting demand for new products
New products are notoriously difficult to plan for. Our team of researchers are exploring how machine learning can be utilised to remove the uncertainty and risk from new product launches. Through applying machine learning algorithms with advanced configuration, AI-based systems will cluster demand history from multiple products to identify and anticipate trends in demand. This, in turn, will enable the system to predict the volume of demand.
The result: supply chain teams will be able to build robust forecasts for new products far quicker than any existing tool available today!
"To sell or not to sell"
How can you determine whether your new product launch has been a success or not? More importantly, how can you determine whether or not a new product should be continued or killed off after the launch phase?
By utilising specialised product classifications coupled with machine learning algorithms and advanced mathematical techniques, the Slimstock Research Centre is exploring how machine learning techniques can help businesses make more proactive stocking decisions. Furthermore, our team is developing a system to identify the necessary selling price of a stocked item required to ensure the product will generate a profit.
Using similar techniques to those relied upon in fraud detection, our team is applying machine learning techniques to enable supply chain teams to identify outliers in demand history and exclude this from any analysis. Furthermore, by utilising advanced neural networks to cluster SKUs that are highly sensitive to anomalies, these products can be managed more proactively.
This development will help to detect anomalies in daily operations like customer transactions, availability and inventory status. As a result, the reliability of both processes and calculations will be drastically improved!
Minimising waste is a complex challenge! Given that waste can be caused by a broad number of factors, the Slimstock Research Centre is developing tools that helps businesses anticipate waste levels and mitigate these causes. Focusing on the optimal order quantity for items where perishability is present as well as the risk of obsolescence at the end of the lifecycle, our team is researching how AI can help supply chain teams to gain greater control over waste.
There is no question that promotions present businesses with some major headaches. However, as AI systems advance, our team of researchers are exploring how such technologies can be harnessed to optimise the decision-making process around promotions. By utilising a technique called ‘deep reinforcement learning’, the Slimstock Research Centre is actively investigating how this development can be utilised to help businesses develop more effective promotions policies.
Download our machine learning infographic now!
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With a baby on the way, it’s always an exciting time. However, here at Slimstock, we understand how challenging it can be to find effective Maternity Cover. Even when you do find the right person, it still takes time to bring that person up to speed with your business processes.
To keep your business on track, Slimstock can offer your team an experienced consultant to support your operation throughout the maternity period. With their extensive knowledge of Slim4 coupled with their industry expertise, our consultants can help you continue your optimisation efforts until your team member returns.
From helping to drive your inventory projects forwards to improving and advancing the knowledge of your team, a bespoke project can be agreed according to your specific business requirements.
Prices are available upon on application.
We cannot ignore it. The complexity of supply chains has increased exponentially in recent years. Whereas once upon a time, a good business strategy alone would be enough to compete, overcoming complexity is now what ultimately sets a business apart from its competitors; a trend which will only become more prevalent in the coming years.
Not only is there an enhanced level of complexity to overcome, but there is also human-factor which comes into play: we want to understand the solutions that are given to us. This is an issue that many managers care about (or at least should care about). “In the past, everything was better”. Well, when it comes to inventory management, that could just be the perfect quote. Of course, simply yelling this out load will not provide a solution.
About Steven Pauly
As a senior consultant and research scientist at Slimstock, Steven Pauly specialises in the mathematical intricacies of inventory optimisation. In his role as a consultant, he has been involved in various improvement projects at large companies. Furthermore, Steven is attached to the Slimstock Academy where he offers masterclasses in the field of forecasting and other areas of inventory management.
The power of machine learning
Over 50 years ago, our understanding of inventory management increased significantly. As businesses realised the enormous return on investment that could be achieved through effective inventory management, this translated into the publication of lots of highquality literature around the topic.
However, there were no computers back then and solutions were based solely on common sense underpinned by the necessary mathematical analysis. The advantage of this is that solutions were transparent, did not require much effort, provided great insights and were mainly focused on so-called ‘quick wins’. As a manager, you are probably asking yourself: why do anything differently now?
Well, there were many problems back then and more and more continue to arise today. Put simply, solutions based on common sense and mathematical analysis alone no longer suffice.
Perhaps you have heard or read the words: ‘DBC system’, ‘machine learning’, ‘IBM’ and the year ‘1997’ in the same sentence.
IBM’s Deep Blue Chess (DBC) system tells a story that took place in 1997. Through machine learning, they managed to beat the world chess champion. An impressive feat even by today’s standards. The internal employees at IBM boasted that the system understood all possible moves available at any given moment in order to determine the best outcome. This, of course, leans more towards a bruteforce approach which makes it especially impressive when you consider the limited computer power that was available at the time.
Yet, there are some snags to this story. Garry Kasparov, the chess champion (or was IBM now the champion?) demanded a rematch. However, IBM refused and the machine was dismantled almost immediately. This, in turn, raised suspicions that Garry Kasparov was cheated by IBM’s Deep Blue Chess (DBC) system.
In 2016, the power of machine learning was once again exhibited. In a strategic game of “Go”, a machine was pitched against another world-champion. Again, the machine was successful!
However, “Go” differs from chess as there are a far greater number of possible combinations. In brief: ‘Go’ has 10^174 possible board configurations. To give you an idea of how this differs from chess: this equates to 1 million, trillion, trillion, trillion more potential combinations.
But what is machine learning? And what makes it different from the brute-force approach or more traditional mathematics? And why and when should we use it? And what exactly do we need to make it work? These are things that management should be shouting about.
First and foremost, is it the learning component of machine learning that separates it from the brute force approach and traditional mathematics. By this, we mean that the machine has the ability to discover relationships and patterns in a data structure without explicitly naming it. It actually learns the ‘rules’ of the problem. This means that solutions can also work in new, unforeseen situations and can tackle problems with high, underlying complexity and a high degree of uncertainty. And that’s exactly where this concept fits into inventory management.
The fact that machine learning differs from other solution approaches creates new, valuable opportunities. Machine learning makes it possible to improve current techniques in, for example, forecasting, but also to tackle a lot of other issues that were not even considered a few years ago. For example, identifying the actual costs if we are unable to deliver an item, or determining when an item is at risk of obsolesce before it even reaches the end of the product lifecycle. Likewise, in production management, latency and machine downtime issues are also in the machine learning queue.
There is no question that machine learning can be very powerful. However, with huge power comes huge responsibility. The main pitfall of machine learning is that for managers, the perquisites are simply not clear.
The conditions for machine learning
Machine learning is essentially no more than applied mathematics with an emphasis on integrating the current computer power available today. Given the increasing number of potential data sources, coupled with the rapid rate of evolution in computing power, machine learning can be a tremendously powerful tool in inventory control.
Machine learning is statistics on steroids. Yet, it is in essence still “just another tool in the box.” And of course, there are downsides to machine learning. Therefore, it should not become a goal for companies to ‘do’ machine learning.
Machine learning is not a holy grail: it finds its strength in situations where data is abundant but the degree of complexity is so high that traditional mathematics fall short. But exactly how much data are we talking about?
If we have a situation with 5 variables that can each take on 10 different values, then we already have 100,000 possible combinations for the machine to learn. In inventory management, there are often many more variables that can take on multiple values.
If the data is available, machine learning has enormous power. However, in practice, this is the greatest weakness of machine learning. Managers must, therefore, consider how data can be collected in a structured, efficient and ‘clean’ way.
Machine learning also requires a lot of computing power. Some machine learning algorithms are based upon an enormous amount of numerical computations and this can sometimes be a problem in inventory management.
In addition, it is important to keep in mind that solutions in inventory management do not only rely on quantitative results. Ultimately, it is the people who have to understand and work with the solutions. Management therefore has to monitor this closely. As a result, it is important to facilitate knowledge about machine learning and theoretical inventory management across the company.
There are already some cases where machine learning has proven that it can offer a superior solution. For example:
- Optimising promotions policies
- Achieving the optimal sourcing strategy based on a variety of sourcing options
- Providing more robust forecasting and insight over irregular and new items
There are also projects that are in the pipeline at Slimstock. For example:
- Minimising shrinkage through parameter optimisation, root-cause analysis and pro-active signals
- More efficient management of purchasing behaviour through automatic exception management
- Optimising the service level by determining the actual cost of out-of-stocks
- Achieving a holistic approach to multi-warehouse optimisation
- Minimising obsolete stock through root-cause analysis and pro-active signals
Are you interested in how a machine learning project works in practice? Do you want to know more about machine learning and the techniques behind it? Do you want to gain some first-hand experience in doing it? Keep up with the Slimstock website and our LinkedIn page for latest updates!
Complete the form below to receive the machine learning PDF!
Unraveling the secret of optimal order quantities
Whether it consists of raw materials or end-products: inventory is unavoidably one of the largest single assets on your balance sheet. In the manufacturing industry, around 37% of total costs consist of inventory costs, while for retailers and wholesalers even more than half of the total costs are caused by inventory. Owning, maintaining, and managing inventory costs a lot of effort and money. However, you need to have enough in stock to deliver customer service: no inventory, no deal. This paper discusses an indispensable inventory management figure: the economic order quantity.
Download or economic order quantity pdf! this PDF will provide you with the basic knowledge you need for the optimisation of your order quantities. Now is time to put it into practice!
Demand management Infographic: a guide to expecting the unexpected!
Demand management is all about keeping customers happy. However, while no business wants to let its customers down, there are always financial constraints in place. Consequently, building huge stock piles of inventory to satisfy potential customer demand which may (or may not) materialise, is simply not an option. So how should you anticipate, validate and prepare for future demand?
What is demand management?
To satisfy demand, inventory is a necessary evil. However, when you consider the impact of demand volatility, fluctuating supply chain costs and the need to maintain a healthy level of working capital, determining exactly how much capital should be invested in inventory is a difficult question. Effective demand management is all about balancing this risk in order to maximise customer satisfaction while minimised inventory cost.
What’s driving your decisions around demand?
Customers rarely buy exactly what you think they will purchase. If you expect a customer to place a huge order and the demand never materialises, invaluable working capital could become locked up in excess stock. Likewise, if you decide not to invest inventory and the customer does actually commit to the order, fulfilling the demand in time could be a real challenge.
In reality, you cannot please everyone- at least not without leaving your businesses bankrupt. Consequently, to remain responsive to demand supply chain teams must have a robust process in place to anticipate, validate and then fulfil future demand.
Ultimately, when it comes to demand management, 5 key questions should drive all decision making:
1) What products do your customers want?
2) How many units do they want?
3) How soon do they want to receive the order?
4) How likely are they to commit to the order?
5) How much are you willing to risk?
How can you make more rational decisions around anticipated demand?
The starting point for any demand management process is the forecast. Using several years of demand history and the most appropriate forecasting method, effective demand forecasting tools can help businesses to identify trends in the data and thus gain an idea of what future demand might look like.
The question is, to what extent can you rely on this insight?
Historic demand can only tell you so much about the future. After all, from the impact of new customers to the influence of weather on sales, there is an infinite number of factors that can influence demand!
Demand management is about more than just using historic sales to build a forecast. Demand management is about taking a robust forecast and enriching the data to make informed supply chain decisions!
Download our guide to effective demand management!
To help you optimise your approach to demand planning, we have put together a simple infographic to demonstrate how you can stay one step ahead of future demand. Complete the form below to download the infographic now!
How can Slim4 support my sales and operations planning process?
An effective (S&OP) process should pull teams from across the business together to ensure a harmonious supply chain operation. However, without the right direction and insight, the whole process can easily result in chaos! But how can Slim4 contribute to your sales and operations planning process?
We are often asked by our customer’s how they can refine and optimise their sales and operations planning process. In this article, we explore how Slim4 fits into the process and how our inventory solution can be used to help our customers realise their goals.
Why do you need an S&OP process?
One of the key challenges that many companies face is in maintaining good communication throughout the organisation and ensuring all teams focus on the same priorities. With no effective means of communicating, organisational silos can develop, and departmental priorities could compromise any coordinated action required to satisfy customer requirements efficiently. Ultimately, working in this dysfunctional way will eventually lead to poor customer service and lost sales.
This is where S&OP Planning comes in!
S&OP planning is effective when it involves people working a coordinated process, enabled at various stages by technology to meet company goals rather than personal ones. Through establishing an effective process, your business will ultimately benefit from the formalisation of a more structured supply and demand planning process which is underpinned by rules based on organisational accountability and the financial performance goals in place.
One Goal, One focus
An integrated financial perspective of supply and demand will facilitate strategic thinking about your business and help reconcile the operating plan across your teams. In addition, performance indicator reports will help validate the effectiveness of each team's planning cycle and ensure continuous quality is a key expectation of your process. As the complete solution for inventory optimisation, Slim4 can be utilised to provide the vision, insight and control required to enhance your inventory processes.
Sales and operations planning: It’s a team sport
As part of the supply chain planning process, key stakeholders from various disciplines within the company reach a consensus about the corporate strategy. The output of the process is a realignment of tactical plans throughout all departments ensuring that all activity supports of the company’s business plan.
The S&OP planning process is an instrument for dealing with changing business conditions by enabling management to decide what the entire company should prioritise each month.
Some of the key perspectives in an integrated S&OP discussion include:• Reflecting on past performance
• Reviewing upside risk and downside opportunities of demand plans
• Analysing supply constraints and planning simulations
• Understanding the fiscal impact of tactical inventory decisions
Organisations that adopt Sales and Operations Planning quickly discover that they can operate in a more synchronised way. They understand the effect that departmental decisions have on other functional parts of the company, their customers, and the wider business. Operations that don’t apply these initiatives well, usually fail to communicate effectively and often struggle to meet business objectives and customer expectations.
What S&OP processes are supported by Slim4?
At its core capability, Slim4 helps organisations to synchronise supply and demand planning initiatives. However, when it comes to planning, our inventory solution provides a “one true vision” of aniticipated demand. However, Slim4 can also be utilised to re-plan inventory based on new priorities, formulate scenarios around product life cycles, align safety stock strategies to your customer’s expectations, and clarify the potential impact inventory decisions. Slim4's functionality can support our customer’s sales and operations planning process in the following ways:
Product portfolio planning:
The first step in an effective sales and operations planning process is in determining which products should be stocked and which should be ordered as and when required. Slim4 provides relevant insight to ensure successful decision making around product introductions as well as for products approaching the end of the product lifecycle. By providing such insight, can help you make decisions on which items should be stocked and which items should be better off as non-stocked. Ultimately, Slim4 ensures the correct decisions are made to support business goals and streamline cash flow.
Given that all inventory decisions are based upon forecasts, supply chain teams must be confident that the numbers are a reliable reflection of anticipated demand. Using sophisticated exception criteria, Slim4 identifies irregular demand characteristics that could impact your forecast. Using this data, the solution automatically calculates accurate forecasts based on advanced statistics taking into to account seasonality and evolving trends. Through providing more scientific forecasts, you can be confident all decisions made during the S&OP process are based on quality forecast data that you can trust!
Promotions require careful planning and coordination between different departments. Whether you’re launching a new product or promoting seasonal items to increase sales, the promotional planning capability within in Slim4 is designed to close the gap between your upside potential and current baseline forecast. As a result, your business becomes better positioned to anticipate promotional demand, determine the optimal order volumes and align delivery schedules; all while maximising the sales opportunity and minimising the risk of excess at the end of the promotion.
One of the main purposed of sales and operations planning is to identify and resolve inventory issues to achieve the optimal inventory situation. Slim4's order planning functionality automatically determines time-phased inventory requirements that are economically adjusted. Slim4 also supports dynamic replenishment to help balance excess stock across locations and ensure the right amount of safety stock is on hand to meet even the most demanding customer needs without sacrificing your profits.
Optimise your sales and operations process with Slim4!
Slim4 provides the structure to help recognise and discover business exceptions that require review in support of your sales and operations planning process. All aspects of an sales and operations planning process concerning portfolio management, sales management, and supply management are supported by Slim4. Together they form ONE general consensus plan.
If your S&OP process is struggling to produce results, let us help you get it on track!
Download the form below to find out more on how Slim4 can support you on the road to success!