Five of the Top 10 Inventory Practices of High Performing Distributors

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Time and time again, people ask what differentiates high performing distributors from the rest of the pack.  What’s the secret? What’s key in maintaining a lean, efficient inventory and high customer service levels?  Is it the processes that I put in place? Is it the software I implement? 

Inventory is the lifeblood for distributors. Maintaining the right inventory on the right items at the right locations is of utmost importance for maintaining high levels of customer service and loyalty.  Maintaining proper inventory levels is challenging for most companies.  It takes a concerted effort to maintain lean inventory and still meet service requirements.  Implementing and following the Top 10 Inventory management practices of high performing distributors will set you apart from the average performers.

1. Demand Planning: Poor demand forecasting is the leading source of issues when it comes to poor customer service. Managing inventory, cost and service depends on an accurate forecast. High performing organizations will analyze history, assess trends and evaluate seasonality and variability.  Statistical forecasting algorithms are often employed for the development of a baseline demand plan.  The baseline demand plan can be enhanced by employing a collaborative forecast process (see #2).  An accurate demand forecast will provide the foundation for a replenishment schedule.

2. Collaborative Forecast Development: Injecting marketing insight into the demand forecast will improve forecast accuracy.  The additional insight provided by the sales or product management team will provide visibility to future events that will impact the demand for products.  Meeting on a regular and consistent basis will drive accountability and ownership of the demand plan throughout the organization. Task your sales and marketing organization with accountability for forecasting inputs.  This includes: insight into customer events, internal promotions and other events that will influence demand for product.  A regular review of forecast performance will provide opportunities for shaping the demand plan, and improving the consensus demand planning process.

3. Measure Forecast Accuracy:  Forecast error is a given, measuring it will assist your organization in improving product availability.  Top performing organizations measure and focus on forecast error to improve the demand planning process.  It will guide the decision to put additional effort into improving the demand forecast.  Forecast error can also be reduced by building accountability for forecast inputs.  Furthermore, understanding and correcting the sources of error in the consensus demand plan (as defined in #2 Collaborative Forecast Development).  This will result in higher forecast accuracy and lower inventories.

4. Develop Their People: It’s the people you put in charge of your inventory processes that make a significant impact on the overall success. Sure, a software solution can help organize your data, alert you of potential threats and even suggest next steps, but it’s how you (and your team) configure the alerts and act on this information that really make the biggest impact on your success. Ensuring team members are properly trained on the tools they use and are up to date on best practices is the single most effective improvement you can make to your inventory management operations. A proactive approach to inventory management depends on having a team that is empowered to analyze, question, and apply knowledge to the data that is collected from your procedures and software. A skilled and motivated inventory-planning organization is key to high performing organizations.

5. Approved Stock List: This is the list of products your organization has committed to carry. It is based on a careful evaluation of various measures like: total quantity sold, number of times your customers purchased the product (i.e. hits), margin contributed by each product, what are customers asking for. The list is comprised of product that is producing margin, selling, or important to your customers. The items that appear on this list have a good reason to be here and are carefully selected. An effective and ongoing process for ‘Separating the stock from the stuff’ will ensure inventory is only being carried on stock your customers expect you to have immediately available.

To learn the remaining top five (5) inventory practices of distributors download the eBook Top 10 Inventory Practices of High Performing Distributors. Any questions please direct to [email protected].


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