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Inventory Control Systems

Warehouse Management Systems

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Boost Customer Service

The number one reason for business failure, today, is inappropriate asset management. Not only can the wrong management style cause expensive inventory buildup, but it can also cause low customer service level.

Customer service level measures how well a company's inventory management system enables them to satisfy the customer's needs. A high customer service level is obtained by choosing the appropriate inventory stock that allows for the maximum level of service at the lowest cost possible. The inventory and warehouse control systems use a series of interrelated programs to automatically keep the inventory at a cost effective level. This level balances the costs associated with ordering the inventory items and the costs incurred by owning them.

Economically Controlled Stock Levels

The balance between the cost of ordering and owning inventory is calculated in an economic order quantity (EOQ) formula. This formula evaluates several factors in determining the most cost effective manner of maintaining inventory. The factors involved include the cost to order an item, the cost to own it, the cost of the item itself, and the monthly usage rate of that item. The flexibility of this management system allows for different classes of inventory items to be managed in a way that produces an easier bottom line profitability than if the company tried to expand sales.

Eliminate Stock Shortages

Stock shortages always cause a decrease in customer service level. The customer service level is calculated by dividing total line of stock sales filled complete by total lines of stock sales placed in a given period. When the service level is calculated in this way, on a line item basis, it allows for discrepancies not reported in other methods. An example discrepancy occurs when a customer settles for a substitute product. The service level should show that the customer was not satisfied 100%, even though his order was filled with the desired quantity. In order for a customer to be 100% satisfied, his order needs to be filled exactly as ordered. Tracking service level by line item also allows you to sort information in various ways, such as by customer, product, and vendor.

Stock shortages can be eliminated with the computerized inventory control system. This system efficiently monitors and calculates many factors involving the control of inventory. It determines when and how much of an item to stock by looking at past averages, costs and trends. This is all done automatically, allowing the employee to concentrate his talents on other duties that BOOST CUSTOMER SERVICE LEVEL!!!

Inventory Management

The inventory management system maintains information for multiple warehouses. Among the many elements for each item at each warehouse, the system calculates and stores usage rates, stocking levels, and movement classification. This information is easily retrieved allowing for flexible reporting to management personnel.

Usage rates help predict future sales from past sales. By establishing stocking levels, the system ensures the item will! be available when the customer requires it. This automation relieves management from the worry of running out of stock. Management personnel, therefore, can concentrate their time in controlling products with high-dollar movement. Each item is classified by its dollars moved through the warehouse in a period of time. This classification enables management to identify where to spend their time in controlling inventory.

With all facets working in concert, the inventory system is designed so that the least amount of inventory provides the best customer service with minimal labor.

Purchasing

The purchasing system offers a series of automatic ordering programs that require minimal involvement from the purchasing agent. The system establishes order points for each item, based on individual item usage rates. When the computer recommends the restocking of a product, it computes the quantity of an item to buy. Various formulas, such as Min/Max, Economic Order Quantity, and Manual Override, are applied in this calculation. By computing the lowest order cost, only the minimum investment dollars necessary are involved.

If central purchasing is invoked, the needs of all the warehouses are pooled together for volume buying with vendors. If the vendor will drop-ship, separate purchase orders are automatically split out for the applicable warehouses. If, however, drop-shipping is not available or if the needs of several warehouses were combined to meet a minimum order, the system keeps track of the amounts each warehouse ordered. Therefore, when the central warehouse receives the order, the computer informs receiving personnel where to send each item.

The benefits of automated purchasing allow a minimum number of people to make purchasing decisions for the entire company for a wide variety of inventory items.

Sales

Manually checking the stock of an! item at the point-of-sale is time consuming, if not annoying for the customer and employee. Providing an item's real-time quantity available for sale eliminates the need for manual stock checking. Real-time is accomplished by updating when the event occurs. The quantity available for sale is calculated by subtracting quantity reserved for sales orders from quantity on hand. The quantity available for sale is maintained real-time every time an invoice is printed. Knowing the quantity available is important in reducing the labor involved in filling customer orders, as well as in providing high customer service.

Location information on an item is also available to the salesman, through a comprehensive location system. All of these features combine to help the salesman service the customer in an informed and timely manner.

Financial

At the heart of the financial system is the general ledger. Information from the purchasing! , sales, and inventory programs is automatically sent to the general ledger.

The inventory system calculates cost of goods sold, profit margin, costs of inter-warehouse transfers, and cost of adjustments in physical counts. This along with other information is included with the general ledger data. Having up-to-date financial information allows management to direct company investments in inventory. Inventory is usually the most significant asset of the distributor, wholesaler, or retailer.