Improved inventory control and cost savings through statistical sampling

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Inventory loss often comes as an unpleasant surprise at the end of a period having a direct impact on company’s profitability. As a result, financial KPIs are not met.

Objectives of organizations are therefore:

  • Controlling and reducing inventory losses
  • Reduction of costs and realization of budgeted profit margin
  • Start of improvement actions to identify and limit inventory losses (breakage, theft) timely
  • Increasing the inventory reliability (e.g. for replenishment purposes)
  • Assess objectively whether the reported inventory value is realistic


Periodic inventory of the entire stock (100% counting) is a time consuming activity that often takes place under great time pressure and substantial costs are incurred. ‘Periodic’ means in practice once a year, so that immediate action is not possible.


 

What we offer

With the use of statistical sampling, it is possible to efficiently and effectively determine the value of the inventory and hence also the magnitude of the inventory loss.

By counting only a limited number of parts (locations, product types, article numbers) on a frequent basis, a much better picture of the development of the inventory is obtained. Rapid improvements plans can then be defined on the basis of errors found in the sample.

If the data of previous 100% counts are still available, it is possible to determine a sample design based on that data, which best suits the organization given the required accuracy (scenario planning).

In summary, by applying statistical sampling the business objectives can be achieved around managing inventory losses. It supports drawing a reliable conclusion, efficiently and effectively, about the inventory value, costs are being saved and improvement plans can be defined timely.

 For questions please contact us.


Take aways 

  • Set up a project charter that will take effect preferable during feasibility but ultimately during design
  • Write a business case and problem statement
  • Define scope of the project
  • Define objectives and goals of the project
  • Involve stakeholders and define priorities
  • Set measurable milestones
  • Ensure that the right sponsors provide buy-in.
  • Identify (project) risks and how to manage them
  • Jointly validate and refine the project plan and develop a roadmap to success
  • Hold regular meeting to track progress of the various work streams
  • Quick insight in occurance of risks (and opportunities)
  • By counting only a limited number of items (locations, product types, article numbers) the value of inventory can be adequately monitored
  • Improvements plans can be quickly defined on the basis of errors found in the sample

 

  • Analysis of earlier performed 100% inventory count
  • Scenario planning for design of statistical sample
  • Analysis of the results of different sample scenarios
  • Design of statistical sample to realize the KPIs set
  • Implement of statistical sampling as method for inventory control
  • Evaluation of sample results, including summary of potential data quality issues