The View From Finance: Freeing Up Cash With Inventory Optimization


Inventory is an untapped, money-rich asset. Most firms have some form of offer chain systems to manage inventory from production through delivery. But these systems focus on transactions. They management what happens, supplying you with visibility. But they’re usually missing the additional optimization and analytics logic that drives the supply chain to control a lot of efficiently and throw off additional money.

That missing piece can cost a ton. Home Depot executives, speaking at an analyst meeting, once said that every 1/tenth improvement in their inventory turns meant a further $200 million in cash.

Of course, you wish inventory. Inventory is what you make, what you sell. If you slash it too much and do not have what customers wish, when and where they wish it, you’ll lose that sale. Customers have additional selections and are less captive than ever. The rule is that they will switch to a different product 50percent of the time if yours is not in stock. That’s a gross margin loss on any particular sale, cash that doesn’t go to the underside line. kantor akuntan publik surabaya

That’s where inventory optimization comes in. It balances inventory and customer service levels (order fill rates), the share of your time you deliver product to customers as ordered and promised – to calculate the optimal mix of where to put your cash. Inventory is like several investment – it needs the proper mix of risk and come back. The risks are locking up money in an excessive amount of inventory or losing revenue as a result of of stock outs. The come is rapid asset turnover into money.

Inventory optimization calculates inventory and repair levels automatically and dynamically to fulfill business objectives on an ongoing basis, and direct your provide chain accordingly. It helps you to specify the combination inventory and service level balance that works right for your company – even vary it across product, customers, time intervals and geographies.

Inventory optimization uses advanced logic and analytics to model and perceive your forecasted demand. Behind the scenes, legion SKUs are modeled statistically against variables like volumes, lead times and lot sizes to identify the proper stock level and replenishment rate for every product in each location.

It hedges for the daily demand and provide volatility and random behavior across your offer chain, from finished goods assembly to the top shopper or retail shelf. It conjointly can handle challenges like promotions, product section-in and retirement, expiration and shelf life, finish of season closeouts and new product launches – crucial in an age of product proliferation and shorter lifecycles.

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