inventory classification
Which items are our best sellers?
Which items are profitable for my business?
How can planning be more efficient?
Organisations are faced with the ongoing challenge of managing their inventory more effectively to minimise inventory investment while using their resources more efficiently within a planning or inventory management function. In order to achieve these objectives, it is important to understand the inventory profile your organisation offers its clients, the frequency of movement, current levels of inventory, the rate of sale and the profit margin at either category, class or sku level. A management tool known as ABC Classification or 80: 20 Rule can be applied.
Items are analysed and grouped into 5 categories (A,B,C,D, E) typically based the level of sales in $ and units. Can also be analysed by customer, product group, product class, EBIT etc which enables a detailed evaluation to be conducted that will improve further decision making.
A Class SKU
- High volume sku with low variability of demand and is ideally suited to a made to stock (MTS) policy
- As demand is more predictable production sites can use capacity, resources and inventory more efficiently.
B Class SKU
- Medium volume sku with mid range variability of demand is more suited to a Made to Order (MTO) policy.
- As demand is mid range, the level of finished goods can be reduced by having the right inventory in component or sub assembly form for manufacturing companies.
C Class SKU
- High variability of demand and is ideally suited to a made to order policy (MTO) for a manufacturing organisation.
- Demand is very low and extremely irratic, supporting these items is the most costly for organisations to carry or produce from components or sub assemblies.
D Class SKU
- New Launch items or Promotional items where demand can be difficult to forecast and if unplanned can deplete regular inventory if the sku is part of a promotional pack.
E Class SKU
- These sku's have surpassed the product life cycle and are generally held in inventory classed as slow moving or obsolete. There is a reluctance on the part of some organisations to write off these items in the hope that they can be recovered, converted or sold at a reduced price.
Select a Supply Chain and Logistics Assessment that identifies real improvement.
We offer a range of assessments that are tailored to specific functions within your oganisation that require review. Depending on the scope of works or the scale of your organisation, our assessments are typically completed within 2 weeks of commencement for single site entities. Reference sites available on request.
