All Posts
Inventory Management / Optimisation
Inventory Management / Optimisation
5 min read

Inventory Optimization – The Impact on Your Bottom Line

Adam Cavanagh
Published on:
April 08, 2021
We frequently talk about inventory optimization in terms of the ways in which it can help you better manage your supply chain. Perhaps you think of it as a ‘nice to have’ approach, something to incorporate in the future. You’d be wrong. There are quantifiable, in some cases almost immediate, benefits of using the AGR software. It’s time we talk about the difference it could be making to your bottom line.

Release your cash

In all likelihood, you’re currently achieving high service levels by carrying high volumes of safety stock to give yourself a security net. Despite the current unpredictability of supply and demand patterns, you don’t need the insurance of massive stock levels across the board to hit your order fulfilment rates.

If your system has the capacity to perform advanced inventory classification, you can prioritise carrying higher volumes only where necessary. You can also set dynamic stocking policies, adjust reordering parameters at SKU level and apply the appropriate forecasting methodology for emerging patterns of demand for individual items.

This level of inventory optimization, powered by the AGR software, allows you to release unnecessary stock, whilst still hitting your service level targets. In the process of reducing your safety stocks, you can release 15–25% of the cash that is tied up unnecessarily. Consider the difference that working capital could make to your business.

Reduce write-offs

Once you are managing your inventory levels more effectively and no longer holding unnecessary safety stock, you won’t see a surplus of obsolete product building up. Freeing yourself from this scenario avoids selling off stock at a discounted price, or worse, writing it off entirely.

As well as advanced forecasting and replenishment methods, the AGR software is capable of building in another consideration to its multidimensional analysis – product lifecycle stage. Demand can change radically as a product progresses through its lifecycle and this pattern of demand is not going to be consistent across all stock; it varies between product lines.

Calculating the appropriate stage for all items across thousands of SKUs manually is time-consuming and complex. Once it’s completed, it then needs to be regularly reviewed in order to ensure that the correct inventory forecasting model is applied for each relevant demand type. This isn’t a good use of your team’s time, especially when their work becomes out-of-date almost as soon as they’ve completed it.

Using AGR keeps data updated in near-time, with optimum inventory levels applied on an item-by-item basis. With this insight, your team can better manage the product lines that are nearing the end of their useful life. Through proactive strategies informed by information from our software, you can reduce your write-offs and levels of obsolete stock by 5–20%, keeping your cash flow healthier and improving your year-end accounts.

Cut stock-outs

Whilst managing your inventory levels and reducing unnecessary safety stocks, it’s still crucial to deliver on order fulfilment. In times of unpredictable demand, as we’re seeing now, it can be difficult to respond to the volatility of surges and drops in requirements.

It all comes down to forecasting. When you can apply the right model, in real-time, based on emerging patterns of demand at SKU level, you’re in a position to respond to changing demand in time to avoid stock-outs. This isn’t achievable with spreadsheets – there are too many dimensions to consider.

The AGR software gives you the capability to minimise your risk of lost sales and missed service levels. As well as cutting inventory excess, you can reduce stock-out situations by 10–25%.

Reduce admin costs

Alongside the stock-related benefits of using the AGR software, there is another big advantage for your team. By automating the areas of the forecasting and replenishment process that don’t require their direct involvement, you simultaneously improve your forecasting potential and save on admin and resource costs.

By avoiding the pitfalls of a manual approach to inventory management and replenishment you can enjoy the advantages of fully optimized inventory and reduce the resource required for the task by 33–66%.

To find out exactly how much difference the AGR software could be making to not just your resilience and adaptability but also your bottom line, get in touch today.