The state of warehouse supply
The task of any company with a warehouse is to optimize stock so that the stock of goods is always optimal for the current project, i.e. there are neither overstocks nor shortages.
An optimally stocked warehouse is one that features as much merchandise as needed for any planned sales, taking into account the arrival times of new batches to the warehouse, in addition to the safety stock, if appropriate.
To calculate the state of warehouse supply, the optimal supply of a given item is calculated in order for it to be available for planned sales while considering the arrival time of new batches, in addition to the safety stock, if appropriate.
Thus, the calculated coefficient of availability of an item is as follows:
CoA = remaining days / (turnaround time + forecast horizon),
where CoA = coefficient of availability
Remaining days [= current balance of goods / average daily sales] that characterizes how many days of sales are enough for the current balance of goods.
Turnaround time = the time (in days) within which the items will be delivered after the order has been sent to the supplier
Forecast horizon = the period until the next order is sent to the supplier
The ideal CoA is 1, which means that there is as much product as needed. A downward deviation means that there is less of the item in stock than needed according to the planned sales, and there is a chance that the company will miss sales of this product. An upward deviation indicates there is more stock than needed, according to its daily sales, so the company has invested too much money in the residuals of this product.
Items featuring an abnormally high coefficient of availability (or remaining days) should be highlighted separately. This can occur if the remaining stock is much higher than actual sales for this item, or else there are no sales at all. We consider such items “dead remainders”.
As part of the report, we accept an error of 10% in either direction from 1, considering that the following:
Insufficient supply of goods: CoA <0.9
Optimal provision of goods: 0.9 <CoA <1.1
Excessive provision of goods: CoA> 1.1
Dead residue: goods for which average daily sales are equal to 0 or residue days > 2 years (730 days)
Here, the total warehouse (or item group) coefficient of availability is considered as the sum of the weighted products included in the warehouse (or group) data, according to the cost value of the current balance of these goods.
In this case, if the solution allows you to give a monetary assessment for each category of goods, you can easily assess the amount of capital that has been invested inefficiently: inadequate investment in insufficiently provided items and excess investment in dead residues and excessively provided goods.
This will allow you to quickly assess the state of warehouse supply as a whole (according to its overall coefficient), as well as to obtain the distribution of goods (with stocks) according to the classes of provision (dead residue/ insufficient / optimal / excessive). This will help to decide:
- which products should be disposed of first — the dead residues.
- what products should not soon be bought and how much operating capital has been invested excessively. This will have been caused either by a buyer error or an incorrect sales plan.
- what products should be purchased as a priority if not sufficiently available. Inadequate state of warehouse supply of these products can lead to missed sales. This will have been caused either by a buyer error or an incorrect sales plan.
- setting your goal for optimizing the warehouse — key performance indicators (KPI) according to the calculated coefficients of availability for the group or the entire warehouse. With the ability to track not only the final coefficient, but also the problem items affected by the actions taken by the person in charge of procurement or warehousing.
The Mycroft Assistant presents this report in a way that is most convenient and accessible to the user. To select the report, click “Report provision of the warehouses” on the left in the report panel:
The report form will open on the right:
The form is divided into two sections: the upper part is the “Filter” and the lower part features details of the selected warehouse.
At the top in the filter, you need to select a company (on whose behalf sales occur) and the prices to estimate the remainder: either the purchase prices, which are the prices specified in the documents of receipt, or the sales prices, which are specified in the transaction documents.
Below is a table with summary information of warehouses with residual state of warehouse supply of goods. The warehouse table includes the following columns:
Warehouse = the name of the warehouse (or outlet)
Coefficient of availability = a coefficient of warehouse provision/supply calculated as a weighted sum of the coefficients of products with residual supply at the moment.
For “Current Balance,” “Dead residue,” “Insufficiently provided,” “Normally provided,” and “Excessively provided”:
Items = the number of different products (range) that are in stock
% = the percentage this type of residue (dead / insufficient / normal / excessive) occupies in the total balance of stock on hand.
Cost = Sum estimate of the remainder of the goods of this type in the selected price type.
For a detailed display of records, the operator must click on a specific warehouse. The user can collapse a section filter by clicking “-” at top right in order to get more desktop space to work with detailed records.
Detailed records for the state of warehouse supply
Detailed records are generated in the form of a table (or tree) of items with residues in a given warehouse.
The data is presented in the following columns:
Current residue — current balance of the selected stock
Cost — the current balance, expressed in selected prices (purchases / sales) at the selected warehouse
Turnaround time — the time (in days) within which the goods will be delivered after a purchase order has been issued to the supplier (the data is taken for each product from the item settings in the IMS);
Forecast horizon — the period until the next purchase order (the data is taken for each product from the item settings in the IMS);
Average sale — the average daily sale of goods, the selected firms and warehouses (information about the average sale is calculated according to the setting of IMS for this product)
The residue for another day — this characterizes how many more days of sales can be covered by the current balance of goods.
The residue for another month — this characterizes how many more months of sales can be covered by the current balance of goods.
Coefficient of availability — this indicates the state of warehouse supply of this item in the given warehouse, based on sales to selected companies.
Please note: in Mycroft Assistant the main parameters of the goods are taken from the item settings in “Items.”
If working with detailed records, the user is provided with a quick filter through which to select which items to display:
“All” displays all selected products at a given warehouse, without a filter
“Dead residue,” “Insufficiently provided,” “Normally provided,” and “Excessively provided” are only items that relate to the corresponding type and belonging to the selected warehouse.
The user is given the choice of which products to display in a simple item tree:
The item tree and goods grouped by item type (with the coefficient of availability calculated for each):
In this way, the user can evaluate the state of warehouse supply of one or another type of item (if grouped by item type).
It is possible to display by item properties (variations in the item parameters; for example — the color or size). Clicking the “Groups” button allows the user to choose to display information according to the calculated ABC groups:
For example, this can answer the question “How well supplied are the most in-demand products?” (Group A) and “How much has been invested excessively in goods with no demand?” (Group C).
Based on the above, by selecting the desired records filter, you can quickly and easily get the answer to the question “Which Group A products are in insufficient supply?”, i.e. “Where can we expect a deficit in the most in-demand items?”
Simply select “Insufficiently provided” above, then click on “Groups” below, and view the results.
Thus, you have a powerful tool in your hands that with just a few mouse clicks can categorize your current residues in the warehouse and determine how to invest funds in your company’s inventory most effectively.
— Demand forecasting – information about it you can find HERE
— Sales analysis – information about it you can find HERE ;
If you want to get started with the Mycroft Assistant – where we have implemented everything necessary for you to work effectively, simply sign up HERE and follow the provided instructions.