The Value of Inventory Projections
An Introduction to the IPROM System
Inventory management and planning is central in the world of distribution. Outside sales, Inside Sales, Customer Support, Warehouse Operations and Finance have a stake in understanding the current and future positions of their company’s inventory levels. Yet we rarely see this information shared outside the realm of Purchasing in most companies. The goal is for distributors to work more collaboratively on inventory projections and share information across business units. The need is for powerful yet simple tools to express current and future inventory levels in a manner that provides relevant information to each stakeholder in the organization.
Who Needs Inventory Projections?
What stake do various departments have in understanding and gaining visibility to future inventory levels and needs?
· Planning for volume considerations and space requirements
· Planning for labor in Warehouse Operations – volume of receiving and shipping
· Planning for cash requirements – managing payments, terms and deposits to vendors
· Forecasting future borrowing base for inventory level based financing
· Matching purchases and inventory levels to booked orders in Order Entry
· Matching purchases and inventory levels to forecasts - both system generated and overridden
· Troubleshooting erroneous transactions in your ERP system affecting forecasts
· Planning and forecasting by product line, customer, location, etc.
From the list above, we can see that inventory management and planning is not just for the purchasing team. In the world of distribution nearly every aspect of the business depends upon and is tied to the current and future inventory of the company. From a service perspective this is true not only for the inventory as a whole, but also broken down to product lines and matched to customer specific needs – both current and future.
The IPROM System
OverDrive’s Demand Planning application provides this powerful and easy to use tool in the form of Inventory/PO Projections. We have coupled this tool with a proven methodology to review and communicate current inventory levels and future needs in a variety of ways to multiple business units. We call this marriage of tools and methodologies The IPROM System (Inventory Projection Methodology).
Demand Planning uses 12 month rolling PO’s to optionally create and work with projections in the IPROM tool. The rolling PO can be run with open parameters or can focus on a specific range. Once the rolling PO is created, the IPROM tool is used to view and work with projections interactively for deeper analysis.
IPROM is available in both interactive and Excel based reporting formats. We recommend an interactive approach leading up to a final set of Excel based reports. The final Excel based versions can easily be shared with other business units within the organization.
Parameters available in the IPROM tool allow the team to analyze and present information in a variety of views. The IPROM tool provides projections for values keying on Purchase Orders, Inventory, Receipts, Demand, or Targets. The information can be expressed as Value, Quantities, or Alternate Quantities (user defined). Drill down detail is available in any combination of Warehouse, Vendor, Class/Subclass, User Code, ABC code or Item.
Once inside the projections, the tool presents information for Beginning Balance, Receipts, New PO’s (projected), Demand, Ending Balance and Target on a month by month basis into the future. This information is either in detail (Item Level) or summarized based on the drill down detail chosen when running the projection or report.
Numerous combinations allow users to work through and analyze the inventory from a high level (total inventory) to a low level (item Level) and all levels in between, and express these numbers in different ways to fulfill the reporting and projection needs of all business units throughout the organization.
Through the use of the IPROM tool and methodology, organizations can achieve a collaborative style of inventory management and projecting, thereby gaining a high level of communication and involvement from all of the stakeholders in such a crucial aspect of any distributor’s business model.
This article only scratches the surface of what is possible with the IPROM tool and methodology. For more information, please contact Mike Parolini at MParolini@overdrivesolutions.com or call 702-476-0878.
