Whether it’s stocks, bonds, real estate, or business opportunities, anyone who invests in these entities understands the investment objective; to get the highest possible return with the least amount of risk.
The method used by investment managers is to collect and analyze large amounts of information. Every day these managers review, analyze and ultimately decide whether or not to invest in an investment opportunity. This happens thousands and thousands of times every day and billions of dollars are exchanged.
In the United States alone, there is approximately $600 billion that is tied up in working capital and a large part of that amount is inventory. Unfortunately, much of this inventory was purchased using outdated inventory planning concepts. For example, a typical inventory planner will only consider three or four variables when deciding whether to invest in inventory, such as weeks of supply, ABCD stratification, usage rates, etc. However, there are at least a dozen or more dynamic variables that affect inventory on a monthly basis. These variables include minimum or maximum order quantities, freight policies, cost, delivery time, past demand, current demand, future demand, service level objectives, reduction objectives, cycle demand, etc. The list is continuous and varies from organization to organization.
The point is, what if you find out that your 401k fund manager only looked at two or three variables to manage your investment? Would you feel confident in your ability to manage your money? So why do many organizations accept the current methods used to manage an asset as huge as inventory?
To plan your inventory more strategically, it’s important to consider why the inventory exists in the first place. Distributors and manufacturers satisfy the demand (need) of customers with the offer (product). In doing so, the seller expects to earn a return (profit) commensurate with the amount of risk. Does this sound familiar with the expectations of a mutual fund manager?
By using advanced inventory optimization, there is a better way to plan inventory that takes into account all the dynamic variables that affect your inventory levels. This approach not only reduces your investment risk, but also improves your return by achieving higher service levels with less inventory. Most of these projects are carried out with a high probability of achieving a return on investment within six to twelve months. Contact TCLogic for more information. You can learn more about TCLogic by visiting http://www.tclogic.com
