Keeping the right level of Inventory to meet sales demand is a complicated process. Analytics provides you with the ability to set priorities and take measured actions as needed.
Determining the optimal inventory level requires considering several factors, including expected demand for products, current product availability, expected future availability, and any discrepancies.
On the low stock report, the current availability can be measured by:
- Quantity on hand
- Quantity on order
- Days to sell out
Open the report, view the days to sell out metric. This looks at the average sale intensity over the past 90 days, comparing it to the current level of inventory, and identifying how many days' worth of inventory is available. To figure out how much you should reorder, you'll need to understand your expected daily sales amount, how much you need to reorder, and your available inventory:
Start by changing the days to sell out filter from the default 7 to 60, giving a wide view of products that have upcoming action points. This gives a working list of products that you can expect will need some attention in the next 60 days. You can change the filters on this report to look at more considerations.
- Now, after viewing the measures for Quantity on Hand and Days to Sell Out, you can calculate the average daily sales volume. To do this, in the calculation building field, divide (/) the quantity on hand by days to sell out.
- Save and run the report.
In the report, a new column displays numbers for the expected daily sales amount.
Next, to figure out how much you need to reorder, you have to figure out how many days' worth of inventory you want, this varies by vendors and categories, whether there fixed costs with each individual shipment (if so, ordering for greater timeframes brings these costs down), whether there extra costs in storing inventory that isn't selling yet (if so, ordering for shorter time frames brings these costs down).
For example, if you want 30 days of inventory stock, in the calculator, enter 30*() to represent the number of days.
Then, copy and paste your calculation for the average daily volume you created in step 2.
Save and run the calculation. The report will have a column with the numbers for your desired 30-day inventory level.
Save the report.
- Now that you've figured out your desired inventory level, you have to find out how much to order. To do this, subtract your available Inventory from your desired inventory level. Start by creating a new calculation, and enter ()-().
Copy and paste the calculation for your desired inventory level in the first bracket.
In the next set of brackets, copy and paste the quantity on hand calculation
Save this calculation and run it. Your report now has columns that highlight the difference between the desired amount and the available amount, or the amount required. You can sort the table by this amount, bring up the products that require the greatest amount ordered.