Inventory Management Advice

Making better use of the data in your inventory system


The Supply Manager's Dilemma

In this blog, you will learn how to improve customer service at the same time as reducing inventory. A computerised inventory system (or ERP system) is just the beginning. How you use the data in that system makes the difference between mediocre inventory management and excellent inventory management.

Good inventory management is providing good customer service with a small investment in stock (inventory).

This blog is for

  1. people who are serious about improving customer service and reducing inventory and
  2. people who are involved in the design of inventory systems.

Don’t expect this blog to look fancy because, if I concentrate on that, I won’t have time to do what I need to do to enable readers to make considerable improvements.

Simple techniques which can be implemented easily will be suggested if such techniques will yield near-optimal results.

For the benefit of readers who want to achieve the improvements without modifying their existing computerised inventory systems (or ERP systems), I will provide one of two alternatives as appropriate. One is use of your report generator if that provides an easy solution. The other is software which I am developing. It will make use of data extracted from such systems. I am considering making much of it available free of charge. The software is to be called “SIMS” (short for “Supplementary Inventory Management System”). The reason for that name is that the purpose of the system is to provide facilities which are not usually provided in inventory systems or ERP systems; hence the term “supplementary”.

A report generator was almost certainly supplied with your inventory or ERP system. Most databases have report generators associated with them. Wikipedia has a list of report generators, both free and proprietary. Unfortunately, most report generators are not well suited to application of mathematical algorithms. This severely limits their usefulness for inventory management purposes. Hence the need for me to develop SIMS.

Ordering and re-ordering are at the heart of inventory management. Shortages result from ordering too little or too late. Excessive stock (inventory) results from ordering too much or too early. There are a number of things which affect the quality of purchasing decisions and, consequently, improvement of inventory management involves much more than just improving purchasing practices and algorithms.

Improvement of inventory management needs to be tackled on all fronts. For example, using a great reordering algorithm will achieve little if the data in the inventory system is unreliable. If lead times are longer than necessary then the scope for improvement of inventory management will be limited. Likewise, if the algorithm used for forecasting customer demands is inappropriate given the nature of your inventory.

It is my intention to provide readers with the means of making considerable improvements to their inventory management without the need to pay large amounts for licences for additional software or to modify their existing inventory systems.

Indications of the benefits of improvements in inventory management will be given in the form of the amount of inventory reduction which can be achieved without reducing the customer service level. This puts a financial value on improvements. The value of an improvement in customer service will be given in the form of the increase in inventory which would otherwise be required to achieve that improvement. This puts a financial value on improvements in customer service.

If you want to discuss any aspect of your inventory management, you are welcome to contact me. Inventory software developers wanting advice in relation to the design of the inventory management parts of their systems are also welcome to contact me.