How to manage your stock level efficiently
Soft4Inventory uses well-recognized TOC (“theory of constraints”) dynamic buffer technology together with the LEAN pull replenishment approach in order to manage your inventory levels efficiently.
TOC dynamic buffer helps to set and adjust appropriate stock levels for each item in each location using inventory state levels rather than forecasting. This simple approach helps to overcome the majority of forecasting issues, such as unpredictable forecasting errors and insufficient planning data for new items with no history. It also helps to manage stock levels with greater efficiency during and after sales campaigns.
Dynamic buffer technology means stock self-adjustment, when inventory levels are used as a signal rather than an analysis and forecast of sales and/or consumption.
The buffer is divided into 3 zones:
Green – High inventory level
Yellow – Optimal inventory level
Red – Low inventory level
The first illustration shows a periodically replenished inventory, where re-order quantities are calculated from the buffer size.
The inventory level should be changed, when:
- Demand changes
- Lead time changes
- Unreliable supply occurs
- A permanent customer is lost
- An item’s end of life changes
- A promotion campaign is on
- Competitors start acting more aggressively
- There are other factors
The next illustration shows how stock level is changed when demand increases.
The next illustration shows how stock level decreases when re-order period becomes shorter.