by Jon Schreibfeder | Oct 15, 2017 | Stocking Decisions
Safety stock provides protection against stock outs due to unexpected demand for a product or delays in receiving a replenishment shipment from a supplier. It is insurance. Like most other types of insurance, it is an expense and there is no “right” or optimum...
by Jon Schreibfeder | Sep 15, 2017 | General
Many organizations assess profitability by calculating the gross margin of products. Gross margins are calculated with the formula: Annual Profit Dollars ÷ Annual Sales Dollars The problem with this metric is that the amount of inventory maintained in stock is not...
by Jon Schreibfeder | Aug 15, 2017 | Purchasing
A vendor’s quoted price of an item is commonly referred to as the “replacement cost”. Many organizations make the mistake of basing their purchasing decisions and profitability analysis on this amount. But, in many cases, other costs are incurred when buying a...
by Jon Schreibfeder | Jul 15, 2017 | Replenishment Parameters
When you replenish the stock of an item, you must decide how much you should order. Many computer systems utilize the economic order quantity (EOQ) formula in helping to make this decision. The formula was originally developed by Ford W. Harris in 1913. Since that...
by Jon Schreibfeder | Jun 15, 2017 | Technology
On an average workday, I receive five to 10 emails advertising a new technology. Each of these “revolutionary advances” promises to: Lower operating costs Increase sales Improve profitability How do you decide which of these opportunities is a worthwhile investment? ...
by Jon Schreibfeder | May 17, 2017 | Forecasting
Maintaining a high level of customer service is primarily dependent on when you reorder a product. For example, let’s say you sell two pieces of a product per day, and the item has a seven-day lead time. That is, it takes seven days to receive a product once it has...
by Jon Schreibfeder | Apr 15, 2017 | Forecasting, Stocking Decisions
What Affects Forecasts Other Than Past Usage Most computers systems calculate forecasts of future demand based on past sales or usage. The theory is that what you sold or used in the past is a good indication of what you will sell or use in the future. But there are...
by Jon Schreibfeder | Mar 15, 2017 | Forecasting
Determine the Best Forecast Formula Last month, we discussed the fact that a single forecast formula will not accurately predict future usage for all your stocked products. But how do you determine the best forecast formula to use for each item? We have found that...
by Jon Schreibfeder | Feb 15, 2017 | Forecasting
Understanding the Elements of a Forecast A demand forecast is a prediction of the quantity of a specific product that will be sold or used in an upcoming time period (usually a month). The accuracy of your forecast is a determining factor in whether or not you will...
by Jon Schreibfeder | Jan 20, 2017 | Forecasting
Monitoring Your Forecast Accuracy Replenishment capabilities in most computer software packages answer two vital questions: When a stocked item needs to be reordered to avoid a stockout? How much of the product should be ordered? A critical factor in...
