Industry Overview
The earlier forecasting method was not scientific, leading to inconsistent forecasts and poor accuracies. A static inventory norm for all SKUs (say 15% of last 3-month average sales) resulted in high working capital due to high inventory and low fulfillment rates. Inventory planning for 8,000+ SKU-stock point combinations add another dimension of complexity to the problem.
Problem Overview
In case of this company, the highly customized nature of the SKUs also meant approximately 1000 SKUs in their portfolio being supplied from their nine stock-points. While about 150 SKUs contribute to around 77% of their sales, the long tail SKUs are essential for maintaining products’ assortment.
The company aspires to.
1.Establish a robust and scientific mechanism for estimating Demand for the SKUs at each of the stock-points.
2.Avoid overstock, stock-out situations, and to counter variations in Demand by optimizing inventory tailored for the SKU at a stock-point.
3.Understand the shifts in customer-mix.