The Significance of Exception Management in Inventory Optimization

By August 27, 2019 Blog Posts No Comments

Save time and resources reviewing large orders with thousands of SKUs.

The term “management by exception” came out of the 1960s and revolutionized the thinking of the time. The idea behind this concept is that only issues that will result in differences from what was budgeted or expected will be brought to management’s attention. By doing so, it frees up management’s time to do other more important things, like planning, organizing, etc.

Exception management has applications for inventory optimization. For example, exception management allows buyers to manage thousands, or even millions, of SKUs while maintaining optimum inventory levels and meeting the customer fill-rate expectations. A feature like this is often overlooked by retailers, wholesalers, and distributors when selecting or purchasing a new solution. While many systems have broad functionality, they often completely lack good exception management functions. The downside for buyers is that they are forced to constantly and inefficiently hunt for issues.

With a state-of-the-art purchasing solution, such as HIMPACT, most items are purchased without the buyer looking at any more information than the exceptions on the order. A typical Topco order with 1,200 SKUs on it takes our customers’ buyers less than 15 minutes to review and approve.

This order level exception is one of the many warnings that bubble up in HIMPACT. We have prioritized the vendor orders based on orders that need placing today versus those that can wait.

HIMPACT also has alerts that warn the buyers about a variety of things, including:

  • Demand patterns and demand levels that are changing
  • Seeing which customer or chain suddenly bought all their inventory
  • Informing the buyer of deliveries that took longer or shorter than expected in the daily lead time forecasting alerts
  • Deliveries that are shorted or overdue
  • Items that are in stock today but are projected to run out before the currently placed PO is due to arrive. HIMPACT then presents fill-in suggested orders from diverters, an overstocked warehouse, local wholesalers, or an expedited lead time from the manufacturer.

If buyers are spending all of their time manually searching for and solving issues, they aren’t being very effective. HIMPACT works while you sleep and, on a daily basis, finds the SKUs with issues that require human attention. This allows buyers to concentrate on the bigger issues so that the task of writing POs is done most efficiently and with ease.