Wise Career Strategy: Additional Inventory Skills Training

Getting additional skills on your own time and with your own money demonstrates practical initiative and dogged determination to prospective employers.  
        
If you’re among the millions of people looking for work and feel you don’t stand a chance against the competition due to limited skills, it’s time to show potential employers you have what it takes to contribute in measurable ways. One way to do this is to proactively get the additional, in-demand skills employers are looking for.

Employers in Retail and Manufacturing have a continuous focus on Inventory Management and Optimization to reduce their working capital requirements. To support this focus they need to train employees suitably skilled in Inventory Analysis and Management Techniques.

If you’re looking for job opportunities in inventory management, purchasing, planning & scheduling, warehousing, or accounting, you need to have a good working knowledge in the following areas:

Inventory replenishment techniques including:

• Reorder Point
• Periodic Review
• ABC Analysis and Classification
• How to improve Inventory Accuracy
• The major Inventory Measures and KPI’s like Inventory Turns and GMROI
• Inventory Cycle Counting
• Calculating Safety Stock to minimize the financial investment in Inventory

Employers today often have hundreds of candidates to choose from, so they can afford to be picky and select only the people with demonstrated skills and those that stand out from the crowd. How would you answer questions on the above topics in interviews?

There is a way to stand out. If you’re willing to learn cutting-edge Inventory Management Training skills, you can take advantage of job opportunities by taking short courses to boost your capabilities and make yourself the star wherever you are or wherever you want to be. By standing out from the rest of the candidates, proactive job applicants get a leg up on their competition and move forward in an otherwise-crowded fields.

Get These Additional Skills Online

In the past, skills training required pants-in-seats on a high school, college or technical school campus. Not anymore. A new educational option has sprung up on the Internet, disrupting the ages-old way of getting the schooling you need to succeed. Much e-Learning is based on “learning by doing”. Costing a mere fraction of brick-and-mortar institutions, online learning is often laser-focused on specific skills development. It is also time-sensitive: you can study at your own pace and convenience. Course modules include well-designed inventory spreadsheets and training materials to walk you through what you need to know and do to acquire a new skill or boost the skill set you already have.
 
Here are some of the benefits of demonstrating Inventory Management Skills and knowledge at the interview:

• The employer will look up and listen
• You’ll stand out from the crowd as someone who has taken the initiative to learn something new
• The employer will realize you’re bringing skills to the job
• You’ll feel more confident applying for jobs because you can demonstrate competency in fundamental Inventory Management skills
• The likelihood of winning the job will dramatically improve

The bottom line: You no longer have to visit a school campus to get a well-respected education. Savvy employers admire and respect candidates who take the initiative to find out what they’ll need to know to serve a company well and then proactively get the training they need to deliver the goods.

Remember with New Skills your Future Starts Now.

Finally…

If you found this blog helpful, please contact the author at InventorySkills.com about other inventory management training guides and inventory planning spreadsheets that enable “learning by doing”. Here you’ll find guides based on e-learning principles that are very cost effective, focused, current and developed by practitioners with a real passion for the subject. Try them. You won’t be disappointed.

What Everybody Ought to Know About Reorder Point?

Inventory management is among the most important aspects of running a production or retail company. Since having an inventory is unavoidable for production and retail companies, they need to have an inventory management system in place, which maintains the inventory level at such a point that is required for the smooth running of the business. For such a system to be evolved, the knowledge of how to replenish Inventory using techniques such as reorder point becomes quite significant. 

So what is Reorder Point?

Reorder Point is that level of inventory at which a company must place an order for the consumed materials to keep the inventory at a safe level. It signifies that point at which a replenishment order needs to be placed to ensure sufficient stock is maintained until the supplier or manufacturer replenishes the materials. The calculation of this inventory level is an important component of an inventory management system.

How to calculate Reorder Point

The simplest way to express the reorder point formula is as follows:

Reorder point = Demand during lead time + Safety Stock

The reorder point formula is often written mathematically as:
              ROP = DDLT + SS

Where:
ROP = Quantity in stock that triggers a reorder
DDLT = Demand During the replenishment Lead-Time
SS= Safety Stock the quantity set to handle variability in both demand and replenishment lead-time

The formula is also often visually represented by the following diagram

Interpretation of diagram:

As stock levels decrease over time (from A to B) they reach the Reorder point B you have set.  At this point in time (B) a replenishment order for a quantity Q is raised with a due date at time C (due date based on the agreed replenishment lead-time LT).

The amount of Safety stock (SS) has been set to allow for variability in the LT Lead-time (that is delivery taking longer than planned) and variability in demand (where demand quantities are much larger than expected).
There are many other forms of reorder point formula that can be used to calculate the right time for placing a replenishment order but this one is the simplest and most basic of them.

How To Calculate Safety Stock

 The calculation of reorder point is not possible unless you know a process of calculating safety stock. Since safety stock is that amount of inventory, which is going to limit the chances of a shortfall happening, it is necessary that the value of safety stock is determined very carefully. There are a number of ways of calculating safety stock. One relies on experience of demand fluctuations, delays in delivery and usage of the current safety stock levels in order to avoid a temporary shortfall situation. This approach is often referred to as a ‘gut feel’ based on experience. It is however very subjective and inaccurate.

The better way is to use a mathematical method based statistics to calculate the level of Safety Stock which focuses on the calculation of the standard deviation between actual demand and forecast demand and a service factor which is based on the customer service level required.

The actual formula is as follows:

Safety stock = Standard deviation x Service factor

This mathematical approach has the advantage of being able to be automated with the level of safety stock being based on variability of demand and the required customer service level set by management.

Summary

In order for companies to never face a situation where either the production process has to be stopped or retail store shelves are empty, they should put in place a working inventory management system and must provide its inventory staff the best possible inventory management training.

What are the Benefits to you?

Lets assume you achieving significant improvement in customer service while keeping your inventory investment to a minimum by introducing a Reorder Point system in your organization what will be different for you?

o    Your boss will look up and listen
o    You will stand out from the crowd as someone that has the company at heart and gets things done
o    Your day-to-day working life easier by being better organized with a clearly defined logic to your inventory planning processes
o    You will have more time to focus on what really matters
o    That job promotion will be looking a lot closer

Remember with New Skills your Future Starts Now

Finally…

If you found this article helpful, contact Wayne at Inventory Skills about other inventory management-training guides and inventory planning spreadsheets that enable “learning by doing”. Here you’ll find guides based on e-learning principles that are very cost effective, focused, current and developed by practitioners with a real passion for the subject. Try them. You won’t be disappointed.

Inventory Cycle Counting: A Must Use Technique for Better Inventory Management

Inventory counting is a mandatory exercise in financial accounting, tax regulations and as a basic management practice. The purpose is to assess the value of stock and serves as an essential tool for safeguarding a company’s assets.

There are tens of procedures a company may resort to in inventory counting with each having its strengths and downsides. The one most touted by financial experts and business managers is the inventory cycle count for quite a number of reasons.

The practice

Inventory cycle counting is a continuous process where stock is verified periodically on a weekly, monthly or bimonthly basis. A small subset of stock in a particular location is chosen, counted and verified on the assigned day rather than undertaking the traditional physical inventory affecting the operations of the whole organization. Select staff, in this case referred to as cycle counters, are assigned roles to physically verify the presence of particular inventory and conduct counts; the final results of the counts are compared with the existing inventory records to assess any existing errors.

Benefits

Cycle counting increases the possibility of accuracy in inventory records. Accuracy in turn, eradicates the need for holistic physical counting and the associated costs. The concept of cycle counting dates back to ages and has exhibited the potential of infusing precision in inventory accuracy, and if well understood, can eliminate structural wastage and other overhead costs. For instance, by engaging the staff in constant cyclic inventory counting, they become well versed with the location, quantity, ordering level and process of the inventory.

If you make a regular inventory counting a habit, you improve accuracy, reduce inventory loss and uncertainties, as well as improve operational efficiency.

Classes of cycle counting

There are several types of cycle counts, but the most used are control group method, process control method and ABC Analysis. For the control group cycle counting, the principle revolves around selecting a small group of inventories and conducting a number of counts within a particular period to ascertain the presence of errors and devise ways to eliminate them for ensuring the accuracy of the count. For the process control method, the counter selects a number of locations where to conduct physical counting and then compares the data with the existing inventory records. Discrepancies are noted and a physical inspection conducted to assess the causes. The ABC Analysis assigns counting frequency in accordance with the perceived level of importance, usage and cost amongst other factors. A count frequency is assigned to each item while ensuring that by the end of a certain period all items have to be captured.

Conclusion

Every business, big or small, needs to be constantly evaluated and analyzed in all of its aspects, especially the inventory, if it is up for long run sustainability and growth. So every business organization must know exactly what is cycle counting . Businesses engaged in regular inventory cycle counting are well capable of catering to the customer demands and needs any time than those not doing so, so you better decide what level of success and growth you aspire for your business.

7 Must Know Inventory Analysis Measures & KPI's

Before we move into the specific details of inventory measure and metrics, let’s first become familiar with the overall concept of performance measurement and why it is so important to organizational success.  Every organization conducts a variety of measurements, but what separates the successful from the not so successful approaches is the level of thought and deliberation that goes into designing and implementing the right measurements to focus on the right things.

This is especially true when it comes to inventory systems and processes; without proper and effective inventory metrics the organization is, for practical purposes, operating blind and potentially creating negative financial consequences.

Some of the benefits an organization will realize from the use of proper inventory measures and KPI’s include:

• Better oversight and management of inventory carrying costs
• More efficient processing and delivery of product
• Improved sales opportunities and delivery times for marketing and sales purposes
• Improved forecasting and management for manufacturing purposes
• Better oversight and evaluation of operating costs related to inventory
• More effective and profitable financial oversight and management

Some of the more popular inventory measures used are:

1.   Inventory Turns by “ABC” inventory classification

2.   Inventory Turns by categories such as; Raw Material, Work in Progress, Finished goods

3.   Days Inventory Outstanding (DIO) by “ABC” inventory classification

4.   Days Inventory Outstanding (DIO) by categories such as; Raw Material, Work in Progress, Finished goods

5.   Slow Moving/Obsolete Stock $ Valuation

6.   Gross Margin Return on Inventory Investment (GMROI)

7.   DUPONT model 

This is just a short list of the potential measures an organization might consider using. The specific choice of measures for every organization will depend on their goals, their needs, and their areas of focus. Selecting the right measures, then, is an important first step toward in effective use of Inventory performance measurement overall.

 

A few Definitions:

Firstly, Inventory Turns

Inventory Turns = annual cost of goods sold divided by the average inventory valuation over 12 months.

The cost of goods sold is the value of inventory sold (at cost, not selling price) for the period considered (12 months for our standard Inventory Turn calculation)

Many organizations use the inventory valuation at year-end but this does not represent the true average inventory over 12 months. 

The average inventory = (beginning inventory+ending inventory) ¸2 is also often used and even this is an approximation.

Care should always be taken when comparing your Inventory turns with other similar organizations due to the time period being taken (3mths, 12mths etc.) and the accuracy of the average inventory valuation being used.

A higher inventory turnover suggests that the company was successful in being able to quickly move the items through inventory to a sale. However, it is important to remember that the turnover depends on the niche of your company and thus, in order to understand whether you are good with inventory management or not, you should compare your results with the industry norms and your major competitors. 

Secondly, Number of Days of inventory Outstanding (DIO)

Days Inventory Outstanding (DIO), basically measures how quickly inventory flows through the company from purchase to sale. It is an excellent measure of how efficiently a company is managing its inventory. In other words it shows how many days it takes to sell the entire inventory. The smaller this number is, the better.

The calculation is:

Days Inventory Outstanding (DIO) = averageinventory ¸((cost of good sold)¸365)

Note: all these inventory measures can be developed using a well-designed inventory spreadsheet allowing you to:

1. Enter test data or your companies actual data
2. Select various reports with extensive filtering capability eg only analyze your  “A” items
3. Automatically generate well formatted reports

These inventory spreadsheets should be professionally designed with no extensive spreadsheet knowledge required by the user.

For additional information and an explanation of the other Inventory Measures including the ABC Inventory Classification logic visit www.inventoryskills.com

How to use your inventory measures effectively:

Using inventory measures and KPI’s effectively is your next most important step.  It is not enough to just put the measures in place; the organization must also analyze the results and interpret them effectively.

This may sound easy enough, but in the real world it is not so simple or straightforward.  Effective analysis makes use of data collected to either validate or invalidate the results.  It is not about “running the numbers” per se, but rather about understanding the underlying data, identifying the useful information offered by this data, and then putting that useful information into action in ways that benefit the organization.

Remember with New Skills your Future Starts Now 

Finally…

If you found this article helpful, contact Wayne at inventoryskills.com about other inventory management-training guides and inventory planning spreadsheets that enable “learning by doing”. Here you’ll find guides based on e-learning principles that are very cost effective, focused, current and developed by practitioners with a real passion for the subject. Try them. You won’t be disappointed.