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The 5 key benefits of implementing an inventory optimisation solution

Written by Simon Abi Saad
Created: 03 April 2018

inventory optimisationImplementing an inventory optimisation solution is about understanding what inventory you need to ensure you meet customer demand and decrease working capital so that you deliver on time, every time.

Getting into the nitty-gritty of your inventory may seem like a herculean task, but implementing an inventory optimisation solution actually saves you time and money, while delivering a seamless customer experience.

Inventory optimisation software allows you to keep track of where your stock is in your entire network and how much stock you have on hand at any given time. This is hugely beneficial to your business from a stocking, sales and customer service point of view - allowing you to give your customers what they want, when they want it.

However, the main benefit of optimising your inventory is the reduction in working capital. By saving money on excess stock, you’ll have far more money available to inject into other key areas of your business.

 

Inventory Optimisation (IO) software will help you ensure that you only have as much stock as you need to on your shelves. It helps you balance how much inventory you need on-hand to meet the targets you’ve set for your business - giving you access to accurate data to guide your decision making.

Logility writes, “Without proper balance, excess inventory accumulates throughout the supply chain and traps vital working capital. Often companies attempt to manage inventory through a ‘rules of thumb’ philosophy or their Enterprise Resource Planning (ERP) system.

This approach leaves companies vulnerable and unable to account for demand uncertainty, supply volatility and the inter-dependencies between nodes and tiers of the network. Inventory Optimisation (IO) can have a huge financial impact by minimising inventory and freeing up working capital while guaranteeing the right stock is on hand, when and where it is needed.

Nucleus Research found that companies applying IO tools generally reduce inventory holdings in the range of 10 to 30 percent.”



What does inventory optimisation look like? Take a look at how the Stanley Black & Decker, using Logility’s Voyager Inventory Optimization™ reduced finished goods inventory by 27%.
Read Stanley Black & Decker Story


Here are the five main benefits of implementing an inventory optimisation solution: 

#1 | Reduce your working capital

  • Optimising your inventory allows you to reduce working capital (by reducing unnecessary inventory buffers) and improve your service level. It ensures that you get your customers what they want, when they want it - without holding too much inventory.

The Result?

  • Reduce inventory by 10% – 30%
  • More capital to invest in other key areas of your business.

#2 | Inventory Planning

  • To reduce inventory levels and improve turnaround times, you can automatically calculate time-phased inventory plans instead of stockpiling excess products.
  • Easily set the best safety stocks and replenishment quantities by individual item.
  • Optimise allocations by location.

The Result?

  • Eliminate redundant stock by accelerating inventory turnover
  • Prevent obsolescence.
  • Reduce mark-down quantities.
  • Save valuable space in your warehouse.

#3 |  Eliminate Supply-Chain Variability

  • Better visibility of procurement, production costs and service requirements.

The Result?

  • More efficient operations.
  • Reduce production and transportation expedition.
  • No disruption of flow for other products.
  • Improved customer service.
  • Get products to market faster.

#4 | Your Customers

  • With the additional benefit of demand alignment and forecasting, you’ll reduce your stock-outs, improve your delivery, and satisfy more customers more regularly.

The Result?

  • Increase your customer service levels.
  • Drive brand loyalty from your warehouse.

#5 | Your Employees

  • Your employees will feel confident, knowing they’re selling the right products at the right margins. The improved information transparency gives you shorter lead times and lower costs, and mitigates unnecessary storage and handling.

The Result?

  • A better-informed, more efficient workforce.  

An inventory optimisation system gives you benefits across the board. It not only helps streamline your processes, but it generates valuable data to aid your decision making. If you’re inventory optimisation system is a good fit for your business, it should save you considerable amounts of money by right-sizing your inventory, reducing excess stock on hand and freeing up capital for you to invest in other important areas of your business.

Achieve measurable improvements by using the techniques highlighted in this handbook. Download the Inventory Optimisation Handbook now and build these capabilities in your company.

Download whitepaper: The Inventory Optimisation Handbook

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