February 19, 2018

Lead Times and Inventory Velocity

Our IBIS system records the date a vendor purchase order was created, the date and time we accepted the goods over our threshold, and the date and time that the goods were opened, checked, counted and put-away - ready to be ordered.

This provides crucial data on Lead-Time and Dock-to-Stock Time - the combination of which determines the delay between placing a vendor order and being able to sell that product –a crucial factor in customer service. IBIS allows our customers to run reports showing this data for different vendors. Reports allow you to measure vendor performance and confidently rely more heavily on those that perform predictably in terms of lead-time and fill-rates.

Having predictable lead-times allows you to place an order “Just-in-Time” avoiding excess inventory. Lower on-hand inventory means lower storage. Lower inventories, in this scenario, does not affect item availability and therefore will not result in lost sales. However, this will lead to higher inventory turns and improved Return on Investment (ROI).

Because inventory-turn data is so important we report upon inventory Velocity using ABC Analysis. This analysis shows which sku are moving fastest down to those that are not moving at all. This Pareto Analysis (the 80/20 rule) has been enhanced to provide our customers with information on what sku are crucial to success and which are costing money to keep around. Reports also show the last date an item shipped!

With all the money you save on storage charges and avoiding buying excess inventory…well, that new Tesla is looking pretty attractive!