Automated Reordering
Automated reordering reduces stockouts and overstock situations by maintaining optimal inventory levels based on demand patterns.
Reorder Point Planning
Set strategic reorder parameters for each item:Reorder Calculation Methods
Fixed Reorder Point
Simple method using static reorder point and quantity.Best for: Stable demand items with consistent lead times.
Min/Max Planning
Maintain stock between minimum and maximum levels.Best for: Items with moderate demand variability.
Economic Order Quantity (EOQ)
Optimize order quantity to minimize total inventory costs.Best for: High-volume items with known demand and holding costs.
Demand Forecasting
Predict future demand using statistical methods:Forecasting Methods
Moving Average
Average demand over recent periods for stable items
Weighted Moving Average
Emphasize recent demand more heavily for trending items
Exponential Smoothing
Automatically adjust to demand changes with smoothing factors
Seasonal Analysis
Account for recurring seasonal patterns in demand
Forecast Configuration
Configure forecasting parameters:Forecast Accuracy Tracking
Monitor and improve forecast performance:- Mean Absolute Deviation (MAD) - Average forecast error
- Mean Absolute Percentage Error (MAPE) - Error as percentage of actual
- Tracking Signal - Bias detection in forecasts
- Forecast vs. Actual Reports - Visual comparison of predictions
ABC Analysis
Classify inventory by value and importance:Classification Criteria
A Items (15-20% of items, 70-80% of value):- Tight inventory control
- Frequent cycle counts
- Detailed demand forecasting
- Close supplier relationships
- Daily monitoring
- Moderate control levels
- Quarterly cycle counts
- Standard reorder point planning
- Periodic review
- Simple control methods
- Annual physical counts
- Two-bin systems acceptable
- Minimal management attention
ABC Configuration
Set classification parameters:Safety Stock Optimization
Calculate optimal buffer stock levels:Safety Stock Calculation
Dynamic Safety Stock
The system can automatically adjust safety stock levels based on actual demand variability and supplier performance.
- Monitor demand variability over time
- Track actual supplier lead times
- Adjust for seasonal patterns
- Account for forecast accuracy
- Consider product lifecycle stage
Slow-Moving and Obsolete Inventory
Identify and manage problem stock:SLOB Identification
Automated identification criteria:Disposition Strategies
Markdown Sales
Reduce prices to clear excess inventory before obsolescence
Return to Vendor
Negotiate returns with suppliers for restocking credit
Liquidation
Sell to liquidators or discount channels to recover value
Write-Off
Remove unsaleable inventory from books and physical locations
Inventory Performance Metrics
Track key performance indicators:Turnover Metrics
Inventory Turnover Ratio
Cost of Goods Sold ÷ Average Inventory ValueTarget: Industry-specific (4-12 for most retail)
Days Sales of Inventory
365 ÷ Inventory Turnover RatioTarget: Lower is better (30-90 days typical)
Stock-to-Sales Ratio
End of Month Inventory ÷ Monthly SalesTarget: 2.0-4.0 depending on industry
Sell-Through Rate
Units Sold ÷ Units Received × 100Target: >80% for active items
Service Level Metrics
Cost Metrics
Monitor inventory-related costs:- Carrying Cost Percentage - Annual holding cost as % of inventory value (typically 20-30%)
- Stockout Cost - Lost sales and customer dissatisfaction from unavailable items
- Ordering Cost - Cost per purchase order including processing and freight
- Obsolescence Cost - Write-offs and markdowns due to excess or aged inventory
Inventory Optimization Reports
Access comprehensive analytics:Reorder Recommendations
Items falling below reorder point requiring purchase orders
Excess Stock Report
Items with months of supply exceeding targets
Turnover Analysis
Items ranked by turnover rate with ABC classification
Dead Stock Report
Items with no movement for extended periods
Demand Forecast Accuracy
Comparison of forecasted vs. actual demand by item
Fill Rate by Item
Order fulfillment rates showing stockout frequency
Best Practices
Review reorder parameters quarterly
Adjust reorder points and quantities based on actual demand patterns and supplier performance.
Conduct regular ABC analysis
Reclassify items annually as sales patterns and values change over time.
Monitor forecast accuracy
Track MAPE and adjust forecasting methods for items with high error rates.
Optimize safety stock levels
Balance service levels against carrying costs using data-driven calculations.
Address slow movers proactively
Review SLOB reports monthly and take action before obsolescence occurs.
Next Steps
Inventory Overview
Return to inventory management overview
Stock Tracking
Learn about real-time tracking and traceability
