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CAAS ERP’s Inventory Optimization features help you maintain optimal stock levels, reduce carrying costs, and improve cash flow while ensuring product availability.

Automated Reordering

Automated reordering reduces stockouts and overstock situations by maintaining optimal inventory levels based on demand patterns.
Let the system manage replenishment automatically:

Reorder Point Planning

Set strategic reorder parameters for each item:
interface ReorderParameters {
  itemCode: string;
  reorderPoint: number;        // Trigger level for reordering
  reorderQuantity: number;     // Amount to order when triggered
  safetyStock: number;         // Buffer stock for demand variability
  leadTimeDays: number;        // Supplier lead time
  minOrderQuantity: number;    // Supplier MOQ
  maxOrderQuantity: number;    // Maximum order size
  orderMultiple: number;       // Order in multiples (cases, pallets)
}

Reorder Calculation Methods

1

Fixed Reorder Point

Simple method using static reorder point and quantity.Best for: Stable demand items with consistent lead times.
if (onHand + onOrder <= reorderPoint) {
  createPurchaseRequisition(reorderQuantity);
}
2

Min/Max Planning

Maintain stock between minimum and maximum levels.Best for: Items with moderate demand variability.
if (onHand < minLevel) {
  orderQuantity = maxLevel - onHand - onOrder;
  createPurchaseRequisition(orderQuantity);
}
3

Economic Order Quantity (EOQ)

Optimize order quantity to minimize total inventory costs.Best for: High-volume items with known demand and holding costs.
EOQ = sqrt((2 × annualDemand × orderCost) / holdingCost);
4

Time-Based Reordering

Review and order at fixed intervals (weekly, monthly).Best for: Low-value items or consolidated supplier orders.

Demand Forecasting

Forecasts are predictions based on historical data. Always review automated forecasts for seasonal items or new products.
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:
interface ForecastConfiguration {
  itemCode: string;
  method: 'MovingAverage' | 'WeightedAverage' | 'ExponentialSmoothing' | 'Seasonal';
  periodsToAnalyze: number;    // Historical periods to consider
  forecastHorizon: number;      // Periods to forecast ahead
  seasonalityFactor: number;    // Seasonal adjustment multiplier
  trendFactor: number;          // Trend adjustment factor
  safetyStockPercent: number;   // Safety stock as % of forecast
}

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

Use ABC analysis to focus management attention on high-value items while simplifying control of low-value items.
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
B Items (30-40% of items, 15-25% of value):
  • Moderate control levels
  • Quarterly cycle counts
  • Standard reorder point planning
  • Periodic review
C Items (40-50% of items, 5-10% of value):
  • Simple control methods
  • Annual physical counts
  • Two-bin systems acceptable
  • Minimal management attention

ABC Configuration

Set classification parameters:
-- Automatic ABC classification based on annual value
UPDATE inventory_items
SET abc_class = 
  CASE 
    WHEN annual_value_rank <= 0.20 THEN 'A'
    WHEN annual_value_rank <= 0.60 THEN 'B'
    ELSE 'C'
  END
FROM (
  SELECT 
    item_code,
    PERCENT_RANK() OVER (ORDER BY annual_usage_value DESC) as annual_value_rank
  FROM inventory_items
) ranked;

Safety Stock Optimization

Calculate optimal buffer stock levels:

Safety Stock Calculation

1

Service Level Method

Set safety stock based on desired service level (e.g., 95% or 99%).
safetyStock = zScore × stdDevDemand × sqrt(leadTime);
// z-score = 1.65 for 95% service level
// z-score = 2.33 for 99% service level
2

Demand and Lead Time Variability

Account for uncertainty in both demand and supplier delivery.
safetyStock = zScore × sqrt(
  (avgLeadTime × demandVariance) + 
  (avgDemand² × leadTimeVariance)
);
3

Fixed Percentage Method

Simple approach using percentage of average demand.
safetyStock = averageDemand × leadTime × safetyFactor;
// safetyFactor typically 0.25 to 0.50

Dynamic Safety Stock

The system can automatically adjust safety stock levels based on actual demand variability and supplier performance.
Adjust safety stock dynamically:
  • 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

Regularly review slow-moving items to prevent obsolescence and free up working capital.
Automated identification criteria:
interface SLOBCriteria {
  daysWithoutMovement: number;    // No transactions for X days
  monthsOfStockOnHand: number;    // Months of supply exceeds threshold
  turnoverRatio: number;          // Annual turns below threshold
  obsolescenceIndicators: [
    'noSalesLast12Months',
    'replacedByNewModel',
    'supplierDiscontinued',
    'excessStockLevel'
  ];
}

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

-- Calculate fill rate by item
SELECT 
  item_code,
  SUM(quantity_shipped) / SUM(quantity_ordered) * 100 as fill_rate_percent,
  COUNT(CASE WHEN quantity_shipped < quantity_ordered THEN 1 END) as stockout_count
FROM sales_order_lines
WHERE order_date >= DATE_SUB(CURRENT_DATE, INTERVAL 3 MONTH)
GROUP BY item_code
HAVING fill_rate_percent < 95
ORDER BY fill_rate_percent;

Cost Metrics

Reducing carrying costs by just 1% can significantly impact profitability without affecting service levels.
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

1

Review reorder parameters quarterly

Adjust reorder points and quantities based on actual demand patterns and supplier performance.
2

Conduct regular ABC analysis

Reclassify items annually as sales patterns and values change over time.
3

Monitor forecast accuracy

Track MAPE and adjust forecasting methods for items with high error rates.
4

Optimize safety stock levels

Balance service levels against carrying costs using data-driven calculations.
5

Address slow movers proactively

Review SLOB reports monthly and take action before obsolescence occurs.
6

Consolidate supplier orders

Combine orders to reduce freight costs and meet minimum order quantities.

Next Steps

Inventory Overview

Return to inventory management overview

Stock Tracking

Learn about real-time tracking and traceability

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