Inventory Management 101- Aging Inventory

Aging Inventory Management

An Aging Inventory is the inventory that has been identify as slow moving base on Demand Forecast Planning, plus an additional cost to the warehouse or stores for storage of the inventory until it is used or sole.

The role of inventory management is to maintain a desired stock level of specific products or items. The desired level is for fulfillment of demand, while minimized the inventory holding cost

Table 1

 
      Analysis of the Aging Inventory base on Table 1

1.     Aging Days Categories

a.     To Categorize the Aging Days Categories (Column J)

b.    Excel Formula of Nested IF

=IFS(I2<=50,"1-50days", I2<=100,"51-100days", I2<=150,"101-150days", I2<=200,"151-200days", I2>=200,">200days")

2.     Base on the aging days, compute the total amount (Cell H24)

3.     Provision of inventory aging amount base on pareto, 80/20 rules

4.     This example, the inventories of ITEM A_1 to ITEM A_5,  can be provision for further disposition.

5.     Further Inventory disposition plan can be via the following methods

o   Scrap

o   Cross sales

o   Reduce future buy, if possible, base on forecast

    

About the Author

Grace is a freelancer for Supply Chain Management specialized in helping companies reducing operation costs and increase profits through optimized Supply Chain, Sourcing and Procurement Operation.

   

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Inventory 101 - Lead time Calculation

Inventory Management 101 – Lead time Calculation

Lead time is the time between the initiation and completion of a production process.

Total Lead time is the total time that need perform production till completion. These includes Supply chain management, manufacturing ,logistics transportation and clearance.

How to calculate lead time?

Sample of Total lead time for production and export

Total Lead time (for incoming and outgoing inventory or SKUs)

= Supply Chain Management + Manufacturing + Logistics + Transportation

How to calculate total lead time in Excel  

1.    Input your date (in this example is either at Purchase Order Creation date or Sales Order Creation date)

2.    Input the Supply Chain Management and Production Lead time. This should be in days (in this example enter the total days at Supplier Lead time or Kitting and Production Lead time).

3.    Input the Logistics and Transportation Lead time. This should be in days (in this example enter the total days at Logistics).

4.    Total Lead time (Days) is the sum of Supply Chain Management, Production Lead time and Logistics) (e.g. D6=B6+C6)

5.    Create a formula to add the days to the date (e.g. E6=A6+D6)

6.    Estimate Arrival date (ETA) is the either Purchase Order Creation Date or Sales Order Creation Date . Format the result as a date.

About the Author

Grace is a freelancer for Supply Chain Management specialized in helping companies reducing operation costs and increase profits through optimized Supply Chain, Sourcing and Procurement Operation.

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Inventory Management 101 _Forecast Planning

 Inventory Management 101 _Forecast Planning

For years, I was working for a multi-level marketing company for materials planning and control.

Inventory forecast and reorder plan has been the frequently asked questions during the weekly material planning cycle.

For the Business environment where forecast accuracy is less than 30%, what is the forecast planning key elements?  

Accurate inventory demand planning enables near to accurate of inventory holding without over or under stocking.  Historical sales trends and market knowledge of the event or timeline of which could influence the demand fluctuation is crucial.

What is Forecast Planning for Inventory Management?

Inventory Demand Forecast planning is the analytical process of analysis the demand of an inventory item over a defined period of time.  The period of time could be ranging for 4-8 weeks for a more accurate planning.

What is variables to be considered?

1.       Lead time

a.       Lead time covers from the time Purchase Orders were place till the Inventory to reach the door.

b.       There should be sufficient inventory to cover the whole duration of lead time

2.       Minimum Order Quantity(MOQ)

a.        The minimum order quantity to reach the economic of scale for the purchase.

b.        Evaluation is needed if the MOQ

3.       Inventory SKUs with seasonal mode

a.       Further evaluation would need for items that could be increase in sales during any festive seasons. These especially applicable for multi cultural society.

4.       Items that are bound for import and export regulations

5.       Items that has shelf life restrictions

The formula for Inventor Forecast Planning, is 1+1 always equal to 2? 

The following Inventory Management 201 series will review the quantitative techniques.

About the Author

Grace is a freelancer for Supply Chain Management specialized in helping companies reducing operation costs and increase profits through optimized Supply Chain, Sourcing and Procurement Operation.

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