The objective of this guide is to describe the present use, application and characteristic of selecting various inventory planning methods, and to explain how the methods are applied by the supply chain professionals.
Poor Inventory Planning Symptoms
Before we dive into methods of the inventory planning we need to understand what are the symptoms and implications of using poor or no inventor planning methods:
- Increasing numbers of back-orders (also known as past dues)
- Increasing monetarily investments while no growth in sales
- High Customer Churn or low customer lifetime value
- Poor customer service or high number of order cancellations
- Lack of sufficient warehouse and storage space
- Lack of proper production capacity capitalization
- Worsening relationships with key customers and distributions
- High qty of obsolete stock and/or high inventory which you don’t need
With inventory planning, the significant functions comprise of demand analysis and order about new inventories.
This guide would be considering five Inventory Planning Methods which includes:
- Kanban
- Re-order points
- Fixed Order Interval
- Run-out time
- Material Requirement Planning (MRP)
Most of the Inventory Planning methods can be used in manufacturing as well as in the distribution industry.
These methods should be seen as a tactical planning level. It concerns balancing supply and demand and it is in this respect dealing with the initiation, control, and monitoring of manufacturing and purchasing orders in order to keep the material flow and the value-adding activity in manufacturing going on without interruptions.
The guide comprises of 23 pages and over 4000 words with picture illustrations and easy to understand bullet point concepts.
An inventory planning method can work quite well in a specific environment but be of less value in a similar environment depending on how the method is applied in detail in practical reality.
Considering that the planning environment and the way an inventory planning method is applied has a major influence on how efficiently and effectively it can be used, it is of interest to know more about which inventory planning methods companies use, in what planning environment they use them, how they use them and how successfully they can be used.