Overstocks and lost sales

When your supply chain is more or less fine-tuned, and your regular orders are being calculated and ordered automatically, your procurement managers can focus their efforts on pain points and gaps, they can spend more time analyzing the roots of the problems and increase the effectiveness of your retail business. There are two main problems almost all retailers face. These are excess inventory (or overstocks) and lost sales.

ABM Inventory has it all, it can automatize your regular reordering and order calculation processes, and offer you a powerful toolkit to manage overstocks and lost sales.

Let’s look at the dashboard, the worktable and the control panel of a procurement manager. The diagrams on a dashboard are located in a certain order, which makes it easier for a manager to focus his attention on the necessary indicators and immediately take a ‘helicopter’ view, look at the big picture of the inventory.

Dashboard

Dashboard

The upper set of the diagrams shows the current level of overstocks for the SKUs within the buffer zones. Each of three diagrams - TOP products, New products and Promotion products - are divided into 5 colour segments, which correspond to the relevant buffer zones as well as to overstocks zone (a blue colour segment) and lost sales (black colour segment).

If you point the cursor to each of these colour segments, you can see the up-to-date number of SKUs in each zone.

Blue colour segment shows the quantity of excess inventory. Black colour segment shows current inventory shortage, which means you have zero level of inventory leftovers, or your products are placed into Safety Buffer. The latter is a customizable option, and is deployed, if leftovers placed in safety buffer are treated as lost sales.

If you click on the diagram segments, you can access the Buffer management section. Here you can see the list of inventory with the same problem. The diagrams are being updated in real time during the day, which allows to have the most timely and accurate information and monitor the changes.

The lower set of the diagrams shows the inventory management effectiveness indicators. The overstocks indicator demonstrates the percentage of overstocks within total inventory number (you can choose another filter on the left and see the percentage of overstocks within the items controlled by a particular manager).

The percentage of overstocks is calculated for active and inactive items which have MTS/MTO status and Buffer level which is higher than 0. Lost sales indicator can assess the percentage of lost sales within the whole company turnover (or again, if you choose another filter, you can track the percent of lost sales within the goods managed by a particular employee). Lost sales percentage is calculated for active items with MTS status. Both indicators are being calculated in real time, in sync with all active storage points. Colour indication allows to track and monitor the updates of each of the indicators.

Another click - and we can see the advanced data, and we can look at the list of products with the accumulated overstocks or vice versa, those which have inventory shortage.

ТОР-products with the excess inventory

ТОР-products with the excess inventory

ТОР-products with lost sales

ТОР-products with lost sales

By default, these 3 categories (TOP, new and promotion products) are placed on a dashboard for quick access, but you can choose any product type and group and filter data by manager, warehouse, supplier etc, as well as monitor the so-called BB and BTB indicators.

BB indicator shows the buffer zone where the leftovers are placed. Briefly, this indicator shows the correlation between Product Leftovers and Product Buffer level (or Replenishment in case the DFO algorithm is being deployed at the central warehouse). Of course, Safety Buffer is being taken into account.

BTB indicator shows the buffer zone where product leftovers are placed taking into account the delivery time. This means, if the BTB indicator is higher than 100%, the leftovers thus belong to the overstocks. And if these indicators are lower than 100% or equal to 0%, this means that the leftovers quantity is insufficient.

BTB indicator is very important for the products which are currently not available in sufficient quality - if this indicator is more than 0%, the replenishment order has been placed and the inventory levels will be replenished soon. Colour indication, blue or black colour filling, helps to immediately detect these products.

The exact quantity of excess inventory is shown in a column named BB rate with a minus sign. You can easily filter data in this column and sort the products by lowest or highest overstocks quantities, depending on current needs.

So, we have got all data, and what shall we do next? To cut the overstocks quantity, we can start a promotion, or a sale, or try to return the goods to a supplier. If this is impossible or makes no sense, you should at least move the overstocks to a central warehouse (you will then distribute them accordingly) or to another sales point (if this store has a demand and these goods will be sold, of course - by the way, in this case you will cut lost sales rate as well).

If you are using ABM Inventory, all you have to do is to select the products, press “Move overstocks” button and choose the place you want them to be placed. The system will automatically synchronize and manage these processes.

Move overstocks function

«Move overstocks» function

The managers can control and edit the quantity of inventory which is being moved, as well as monitor the leftovers, the goods on the way, the ADU and the overstocks by sales dates in target warehouse.

You can’t control what you can’t measure, so it is very important to possess data and calculations of money which is being tied up in overstocks and lost because of inventory shortages. ABM Inventory has a special built-in function which will help you to generate reports on overstocks and lost sales (in money equivalent and in percentage), as well as to monitor the following data:

  1. The structure of MTS products according to their belonging to buffer area at the beginning of the week (in purchase prices)” shows the sum of money which is tied up in overstocks. You can see the total sum for the whole company or filter data.

    The structure of MTS products

    “The structure of MTS products according to their belonging to buffer area at the beginning of the week (in purchase prices)” report

  2. The quantity of MTS products in warehouses according to belonging to the residual at the beginning of the week to the buffer zone” - demonstrates the quantity of SKU- locations in overstocks areas and in safety buffer zones, or those having zero balance at the beginning of a week.

    The quantity of MTS products

    “The quantity of MTS products in warehouses according to belonging to the residual at the beginning of the week to the buffer zone” report

  3. 1/2 «Average overstocks within the last and 4 preceding weeks” and “Average lost sales within the last and 4 preceding weeks” visualize data and help to identify the product groups/stores/managers or suppliers which have the highest or the lowest shortages and overstocks, and analyze the dynamics by sorting and filtering the necessary indicators. You can even monitor the separate products.

    Average overstocks within the last and 4 preceding weeks

    «Average overstocks within the last and 4 preceding weeks” reports

    Average lost sales within the last and 4 preceding weeks

    «Average lost sales within the last and 4 preceding weeks” report

  4. 1/2 “Change analysis of the surplus for the last week/the week before last” and “ Change analysis of lost sales for the last week/the week before last” - helps to control change dynamics and quickly react if the situation becomes alarming.

    Change analysis of the surplus for the last week

    “Change analysis of the surplus for the last week/the week before last” report

    Change analysis of lost sales for the last week

    “Change analysis of lost sales for the last week/the week before last” report

  5. Current surplus of the items with lost sales” - this report will help to avoid inventory disbalance situation which happens if one store has excess quantities of a product, and another store does not have this product at all. This report points out all options of product transfer between sales points and calculates the percentage of demand which can be accommodated using current overstocks.

    Current surplus of the items with lost sales

    “Current surplus of the items with lost sales” report

Get started with ABM Inventory

Leave your contacts so we can schedule a demo