Understanding the balance between holding cash and delivering on customer service requirements for better performance
Inventory Management focuses on shipping appropriately bundled products to fill customer orders. Managing customer requirements, speed of order fulfillment and holding buffer stock are key.
Managing inventory is a complex balancing act. Buffer inventory ties up cash compounds, but removing buffer stock can have consequences. For example, culling rarely ordered products can reduce inventory costs, but key customers may complain if they are out of stock. In this case, the decision must be aligned with other functions such as Sales and Customer Service.
With the Inventory Management decision area, you can set planning goals and scorecarding metrics for these elements to improve your performance management:
- Inventory days and turns ($, %, and #).
- Product SKU and order frequency (#).
- Average FG (# and $).
- FG end, in, inventory carrying cost and out ($ and #)
- Time since last order (#).
Most importantly, you can analyze these goals and metrics by a number of dimensions to find the hidden gems in the data:
- Fiscal month / year.
- Brand and product line.
- Warehouse region / district.
Using the Inventory Management decision area
You set targets based on your goals and metrics in Inventory Management. You monitor your success by looking at how you measure up against your targets. Further, you dive into your results to find out more about these elements underpinning performance management.
- Inventory ($): Which of our products earn less than one percent of total margin? Of these, how many go to our most important customers?
- Product SKUs (#): What are contingency measures if we remove this rarely ordered product and our key customers complain?
