Sales analysis is often used as an example of how Business Intelligence adds value and delivers ROI, but inventory analysis is just as useful — and maybe more so. Because while the impact of sales analysis takes time to work its way through to the bottom line, inventory analysis has more immediate benefits.
Typically the high demand products are precisely those that it’s difficult to keep in stock. Meanwhile, the shelves are groaning with products that aren’t selling. And if cash is tight, the supplies of incoming inventory to replenish popular items can become erratic, or dry up completely.
There are 5 basic ways to unlock your cash from inventory:
- Use inventory analysis to cut down reorder quantities
Using inventory analysis to express individual stockholdings in terms of days of sales can result in questions being asked. Why on earth do we have 10 months’ worth of sales of this item sitting on the shelves?
Don’t reorder quantities that are too large — either due to a setting in an inventory control or MRP system, or taking “advantage” of discounted rates for bulk purchase. Buying fewer items, even at a slightly higher price, is likely to be a more profitable strategy.
- Use inventory analysis to re-set safety stock levels
Fast-selling items have a much lower demand variability than slow-moving items. But often there’s just as much safety stock for fast-moving items as for more erratic, slow-moving items.
With inventory analysis, safety-stock levels can be better aligned with demand variability, freeing up surplus stock without impacting customer service levels. The result: lower inventories — and happy customers.
- Use inventory analysis to generate cash from surplus stock
With inventory analysis, it’s very easy to see that the stock levels of some items are way out of kilter with requirements. The situation could resolve itself naturally but it’s often better to explore ways of selling off surplus stock, once identified. Offer discounted prices, sell to a specialist broker or selling back to the original supplier. Either way, it’s cash in the bank.
- Use inventory analysis to raise service levels, and boost sales
Sometimes, safety-stock levels are too low, especially on fast-moving items and it goes out of stock. Customers may wait until its back in stock. But it may be a lost sale.
Raising service levels by re-setting safety-stock levels has a negligible impact on inventory holdings, because the items involved typically turn over very quickly. But the impact on reputation, customer satisfaction levels, and revenues, can be significant.
- Use inventory analysis to capture trends
Are the sales of an item rising or falling rapidly? Is demand predictably higher at some times of the year than others? Are certain items routinely bought together?
Information like this allows businesses to better manage their inventories, boost sales, and increase customer satisfaction.
But without it, such things can be difficult to spot and a lost opportunity.
Inventory analysis: the bottom line
For businesses with inventory to manage, a Business Intelligence-based inventory analysis toolkit can be a valuable way of generating operational insights and improvements, but also freeing up cash and boosting sales and profits. And with today’s Cloud-based Business Intelligence, the power, ease of use and affordability of inventory analysis tools has never been greater.