Retailers perfectly know that not all inventory they have in their assortments belongs to the A-category. You will always have C- or D-category items on your shelves - sometimes they serve to support model ranges or size charts, sometimes they help to stand out from competitors, and sometimes these goods are just new or customers do not understand their value and do not want to buy them. Such goods may belong to slow-movers or have rare sporadic sales.
Importantly, slow-moving items also tie up the retailer’s capital, so dealing with these items require considerable action and knowledge.
ABM Inventory has a set of powerful tools to manage and control these types of inventory items effectively and uses the following techniques.
It changes buffer quantities for the goods which have low sales and large packaging. MOQx technique is being deployed at the moment buffer quantities become less than the number calculated by multiplying packaging size by a certain coefficient (1.5). Buffer is changed in any case, it does not depend on the leftover level within a buffer. With each replenishment cycle, buffer is being recalculated on the basis of the average usage rate.
This allows to better react to the slightest demand fluctuations, which is very important for these inventory categories. And you can always modify the settings and add an insurance coefficient to protect yourself against short supplies or sudden demand change. MOQx technique also keeps a record of promotion periods: if the promotion is active, these days are included into buffer calculations, and if the promotion is over, these days will be excluded. This is made to keep the level of regular buffer inventory at a well-balanced level and not to set it too high.
Product data: MOQx technique
ADU for slow-movers
ADU (average daily usage) is an average daily level of goods usage across the stores, which is calculated on the basis of data received within 14 valid days using the weighted moving average method. However, 14-days-period is too short for slow-moving items. The system allows to modify its settings and indicate the RD cycles number, needed to calculate the average sales rate for slow-movers and change the number of sales points (sales days) within 14 valid days - to correctly use ADU technique.
Please note that the number of RD cycles shall also contain upper and lower limits of the number of days. Usage data received within an indicated period is being considered only for the valid points, when available of surplus inventory level was not equal to zero, and the inventory was not a promotion item. This means, the ADU for surplus inventory that was not sold within the last 14 days, will equal its average sales rate for the last 45 days (if all the settings were correctly modified).
Exclusion of wholesale
The option of wholesale exclusion (wholesale means those surpassing average sales 50 times and higher, according to system settings) in ADU and average promotion sales calculation helps to avoid excess buffer levels and excess orders, which may happen if some product can have rare sales in very large numbers.
Product data: Rare sales in large numbers