7 Habits of Today’s Top Inventory Management Teams
What can you learn from the habits of today’s top inventory management teams?
We’ve been collecting insights from blue-chip inventory analysts over the years and the results have become more and more consistent.
Today we’ll share those insights, along with our analysis, so you can learn from these leaders and discover how your inventory planners stack up. Want a sharable copy of this infographic? Send a quick note to email@example.com and we’ll shoot it right over.
How Do You Stack Up?
We asked wholesale and retail distributors using advanced inventory planning solutions to answer 7 questions about their top-performing items. We then added our commentary below. Everyone on your team can learn and benefit from these leaders’ habits in each of the 7 areas. Do your habits align with theirs? What are you NOT doing that you might want to try?
A Little Background
First we better explain what makes an inventory management team a ‘blue-chip performance’ team?
A blue-chip performer (inventory analyst, demand planner) is an inventory management professional who brings an ‘investment mentality’ to work each day. They follow the winning formula of strong component setup, disciplined daily replenishment, and intelligent and targeted refinement of their items through advanced forecasting tools and analytics. They have a passion for our profession and they help to elevate team members around them.
Ready? Here we go…
HOW MUCH TIME DO YOU SPEND EACH DAY ON REPLENISHING INVENTORY?
-60 minutes or less-
Yes, we realize there can be extreme situations at times, but most blue-chip inventory analysts work to complete their replenishment first thing in the morning. And they do so within an hour.
Many responded that it rarely takes them more than 30 minutes. Of course, this is only possible if set-up is performed well, and they’ve done smart, targeted, period-end work to refine the components. Today’s analytics and replenishment optimization tools cut down this time as well.
Want to take steps to get to this level?
Set a schedule to refine each supplier over the coming weeks. With your experience and increased system understanding since your implementation, you will likely do a better job than the first time around.
Start by working a few suppliers each day. As you do, keep them grouped or categorized separately so that each morning you have a different mindset when performing replenishment on the recently enhanced lines. Avoid changing suggested order quantities, but rather apply long-term fixes to any components requiring a change.
Before you know it, you will have a new approach and be following the formula for success. Your orders will make much more sense, which will provide confidence to allow you to release orders quickly.
Make progress in steps. Work to have your orders done by 11:00 am next month, then improve to 10:00 am the following month and beyond.
WHAT PERCENTAGE OF YOUR TIME IS SPENT DIGGING DOWN TO THE ITEM DETAIL LEVEL?
-5% to 8%-
You knew this question would be on the survey.
The key to performing replenishment in just 30-60 minutes each day is to not feel the need to dig deeper and question your quantities.
This number actually matched very closely with the average percentage of new items, which is encouraging. Blue-chip inventory management professionals don’t feel the need to live at the item detail level. When they do go in deep, they get out quickly!
Quality set-up and refinement will keep your replenishment strategic and your results strong.
WHAT PERCENTAGE OF SUGGESTED ORDER QUANTITIES (SOQs) DO YOU CHANGE?
-1% to 3%
Yes, many of the top performers answered -0-. We were thrilled and proud.
Blue-chip analysts do their work ahead of time and they do their best work at the component level. They fix problems long-term, rather than making last-second changes.
Actually, they don’t find many reasons to make changes to their SOQs, as they know the order quantity is simply the end-result of their component work.
We also learned that many changes that are made are tied to new items or a similar category.
WHAT PERCENTAGE OF DEMAND FORECASTS ARE CHANGED WHEN PERFORMING EXCEPTIONS?
About 10% to 15%
For starters, blue-chip inventory analysts perform exceptions with great focus, and they do it on the first day of the new period. They have a strategy. Most who responded shared that they leave about 90% of the items alone. They make forecast changes only where necessary.
Many of them shared notes that when they were new analysts on their solution, they made many changes. However, over time, they realized that many of their changes were based on emotional reactions. Over time, they were making make fewer and fewer adjustments.
Today’s advanced demand forecasting solutions incorporate more intelligence into their item exception science, which can sharply reduce the items that require attention.
In addition, the analytical tools offered to analysts allow them to create custom and flexible reporting used at the end of each period, as well as during the period.
It’s also a great idea to measure the results of your changes; however, we did not dig into that data on this survey. It will make for great analysis on the next survey.
WHAT PERCENTAGE OF TIME DO YOU INVEST ON NEW ITEMS?
At least 3x that of other items, maybe 4x
The overwhelming answer included the comment of ‘not enough time.’ [queue the eye-roll]. Nevertheless, this is a reminder that new items benefit greatly from collaboration between the inventory analyst, the category manager, and the knowledgeable talent at your supplier.
If you establish a mindset that new items will require 3-4 times the attention of other items, you will take a strong step toward new and impressive results. If new items make up 7% of your SKU base, they probably require about 25% of your time invested in item management.
Your system should help you work the day-to-day items efficiently so that you can use your time and knowledge on areas like new item management and promotional management.
Invest the proper time, and new items can become an area of strength for your team. Related podcast: Let’s Finally Get Serious About Optimizing New Item Inventory
WHAT PERCENTAGE OF YOUR ITEMS HAVE SEASONAL DEMAND PROFILES?
Much more than you would think!
This answer is certainly very different by industry and by analyst, but respondents consistently state that they have more items profiled than they ever thought they would.
You can typically find helpful information and facts for your business and your analysts from others in your industry. The PlanningPosts community is very open and helpful at sharing our experiences.
Check out our Growing List of Surprisingly Seasonal Items. It’s a unique list, as the community stepped up and provided many inspiring examples. (Feel free to send us yours; we’ll add them to the list!)
Inventory analysts over the last 30 years have stated that they typically find about 3X more items with seasonal tendencies than they thought they would. It is a good idea to compare the percentage of items that have profiles from buyer to buyer in your company. You know that some analysts have ‘seasonal’ lines, but everyone has some level of seasonality.
WHAT PERCENTAGE OF TIME DO YOU SPEND ON DEALS & FORWARD BUYS?
Most responded ‘Not Enough.’ This at least makes the point that inventory management professionals are realizing the value of these deal opportunities. These purchases are also called inner margin buys or investment buys.
These deals are often your best opportunity to deliver additional profit to the organization. A blue-chip analyst will free up time to invest in this area.
In fact, the top performers are not just responding to deals, but are going after unannounced deals!
Yes, there are additional areas we will explore in future surveys, including:
- Forecast accuracy
- Service accuracy
- Overstock management
- And many others; stay tuned!
We leave you with a few questions for your team to reflect on:
- Inventory analysts & demand planners, are you executing like a top performer?
- Team champions, what percentage of your team is executing with a blue-chip strategy?
- Team champions, what will it take to move from 20% of the team performing as blue chips to 80% of the team?
- Most importantly, what results will you see if all of your team performs like these leaders?