Balancing Inventory and Profit

The overall objective of any state-of-the-art purchasing solution is obviously to optimize each and every replenishment buy; making sure that the decisions made are consistently aligned with your service and profit goals.  HIMPACT combines factors from demand forecasting, lead time forecasting, vendor order cycle and inventory models to profitably balance inventory and customer service. Our goal is to identify the right inventory levels per location/SKU; providing you the highest level of customer service while minimizing your inventory investment.

The simplest explanation of how HIMPACT does this is that it analyzes demand patterns, vendor economies of scale and delivery performance along with you customer service goals to generate replenishment orders. The system dynamically adjusts to changes in consumer demand and vendor performance to keep your inventory at the customer service target specified day-in and day-out.

Before this PO is even created, though, our solution has already analyzed and incorporated any and all Vendor and Item Discount brackets, Vendor Deals, and future Promotions. HIMPACT daily builds orders up to a full truck, or several trucks or simply up to the vendor’s order minimum.

HIMPACT helps you Know More, reliably balancing the relationship between inventory and customer service — Delivering the targeted customer service you need , while optimizing profits down to the most granular levels.

Analyzing What Is Most Profitable

This Service Level Analysis was run for a particular vendor. HIMPACT is recommending that the overall Service Level Target for this vendor be increased from its current 96.5% to 97.1%. The analysis is done for all items in the vendor line. By increasing the service target on stable items with healthy margins, we are capturing more sales on these and by dropping the service target on more erratically selling items where the cost of the lost sale is less than the cost of carrying the item at a level to try to capture that incremental sale, we end up with an overall higher target, with less inventory and more profit.

How do we analyze what is most profitable?  Easy, we balance the cost of carrying your inventory vs the cost of ordering/handling it. Besides this essential function, HIMPACT also recommends the most profitable customer service goal by location/SKU.  The solution is dynamically balancing the cost of lost sales vs the carrying costs of inventory. Statistically, we have identified the inventory levels required to provide 92, 95 or even 99.5% customer service.  Again, this is by location/SKU.

Our unique bottoms-up approach to planning allows Retailers and Wholesalers to set service goals at their most profitable levels: an item may be most profitable at 99.5 percent at some locations but 95 or 98 at others.  When we talk about HIMPACT being integrated, we give you the ability to see your service level performance versus goal on a daily basis and make adjustments.

From Analysis to Execution

In just one mouse click you have gone from analysis to execution. The new service goals are then what drive the replenishment orders going forward.

HIMPACT software makes inventory more profitable with stronger forecasting of demand, lead times, and seasonality, with better analysis of discounts and buying opportunities, along with rich retail-focused tools for replenishment, promotions, and allocations.

Rather than assign the same “one size fits all” service level target to all SKUs in a group, Service Level Optimization assigns different service targets to each individual Location/SKU, further driving inventory savings while still achieving the same overall service level mix.

HIMPACT gives you the tools to tailor your supply chain strategy to each channel and segment of your business.