Efficient order quantities (EOQs) incorporate the cost to place an order ( POC ), the forecasted annual demand ( FAD ), the inventory-carrying rate ( ICR ), and the unit inventory value ( UIV ). Large order quantities yield high inventory levels and high inventory carrying costs but fewer orders and lower ordering costs. High ordering costs and demand rates suggest large order quantities. High inventory carrying rates and high unit inventory values suggest small order quantities.
The unit fill rate (UFR) for an item is the portion of the total number of units...
Optimal storage utilization helps enforce healthy inventory management. In our early work with Honda their...
Efficient procurement inventory (EPI) is often required to realize steep discounts when a special opportunity...
Suppose you were sick and went to the doctor for a diagnosis and prescription. When...
The inventory carrying rate (ICR) is the percent of the unit inventory value used to...
Lot Size Optimization
The RightStock™ model also distinguishes between value added inventory (VAI) and excess, non-value added inventory (NVAI). Value added inventory is the sum of safety stock, lot size, and pipeline inventory. Those three types of inventory
Active and dead stock inventories are relative references to inventory that is fast vs slow/not moving. The definitions of “fast, “slow” and “not” are also relative. The most common definition of active inventory is inventory
Seasonality and build inventory (SBI) levels production, machine, line and plant utilization. One of our clients is a large frozen food manufacturer and one of the largest producers of frozen pies. The large majority of
Inventory should also be classified by its stage in the value stream. Raw material inventory (RMI) has no value added. Work-in-process (WIP) has some value added, but is not finished. Finished goods inventory (FGI) has
A few years ago I received a phone call from one of the world’s most advanced supply chain CPG firms. They wanted our assistance with inventory optimization. I was quite surprised by the purpose of
The inventory carrying rate (ICR) is the percent of the unit inventory value used to compute inventory carrying cost (ICC). The inventory carrying rate includes: Opportunity cost of capital (the rate of return that could
An optimization statement is comprised of two components - an objective function and constraints. Isolated to inventory, the optimization becomes finding the inventory level that yields the best possible financial performance for the business and
The "bullwhip effect" in supply chain management is a reference to the increase in the variability of order sizes and the accompanying increase in inventory levels that occur moving backwards in the supply chain from
In a recent project with one of the world’s largest and most critical healthcare providers I was stunned to learn that they did not even measure inventory accuracy, let alone know what it was or
The inventory conundrum is exacerbated by many complicating factors. Those factors can be categorized into five major malfunctions: Data Discrepancies Inadequate Training & Education Problematic Perspectives Misaligned Metrics Poisonous Paradigms Data Discrepancies Base Data