- It’s based on rules and logic that everyone can understand
- It’s easy to ‘tweak’ the boundaries and rules for modelling
- It focusses attention on the part of your business that delivers the most revenue – focus where it matters!
- Regular reviews and reclassification of products with revised Pareto Core identification reduces the risk of outdated stocking policies, overstock and stock outs
Rachel Sellers
May 03, 2018
Inventory Policy: Focus on your core and trim the fat
For many out there this is the ‘January’ of the working world. A new financial year, new plans, strategies, hopes and dreams….
My Supply Chain Resolutions are as important now as ever. In this blog, I’m going to look deeper into my second Supply Chain resolution “Focus on Your Core and Trim the Fat”. It’s all about inventory policy and Core product identification.
Getting this right will improve a whole host of things throughout your entire supply chain; warehousing and logistics costs, procurement saving opportunities, write down savings and availability improvements, ultimately leading to increased sales revenue and a healthier bottom line.
“The holy grail of having the right stock of the right product is ever elusive…you’ll never get it right 100% of the time – but you can get close if you stage agile, adapt and review your inventory policies. “
Step One: Defining your Core
Before we can do anything, we have to define our Core. Whatever your business, industry or market – defining your core will give focus to your business.
Defining your Core product can be done in various ways. This could be determined by sales volume, overall revenue, profit, key customers, strategy…it’s really up to you.
Step Two: How to determine your Core
As a general guide, best practice is to use a Pareto classification method. Remember, reviewing your core on regular basis is advisable (annually is most common).
This approach is popular because: