Illustrative scenario on fictitious data; the companies and figures are not real.
Inventory control
Type of business: Spare parts trading company (fictitious)
The warehouse is full, yet customer orders wait because of stock-outs.
1Problem
While capital sits idle in the warehouse, shortages of fast-moving items cause lost sales.
2Data
- 18 months of item stock cards
- Lost and back-ordered sales orders
- Supplier lead times
3Analysis
- ABC/XYZ classification of items by value and demand stability
- Calculating safety stock and the reorder point for each group
- Identifying dead and slow-moving items
4Finding
In the sample data, the same ordering policy was used for every item; low-value items were over-ordered and critical items under-ordered.
5Action
- A separate ordering policy for each item group
- A monthly dead stock report for decision-making
- Stock-out alerts for group A items
6Result
In this scenario, capital moves from low-value items to fast-moving ones and stock-outs decrease.