Case Study: Inventory Analysis for Any Manufacturing Company
Any Manufacturing Company is a medium-sized manufacturing company that produces electronic components. They have a wide range of products and maintain an inventory of raw materials, work-in-progress (WIP), and finished goods. The company has been experiencing issues with inventory management, including stockouts, excess inventory, and increased carrying costs. The management team wants to conduct an inventory analysis to identify areas for improvement and optimize their inventory management practices.
- Identify opportunities to reduce stockouts and excess inventory.
- Streamline the procurement and production processes to improve efficiency.
- Develop a sustainable inventory management strategy for future growth.
- Key Analysis Componebts:
- Demand forecasting: Analyze historical sales data to forecast future demand for different products accurately.
- ABC analysis: Classify inventory items based on their value and importance to prioritize management efforts.
- Economic Order Quantity (EOQ) analysis: Determine the optimal order quantity for raw materials to minimize ordering and carrying costs.
- Reorder point analysis: Calculate the reorder point for each product to avoid stockouts.
- Lead time analysis: Assess the lead time for raw materials and production to optimize inventory levels.
- Carrying cost analysis: Calculate the carrying costs associated with inventory to identify areas for cost reduction.
Comparing the top 10 high value products at the beginning of the year with those at the end of the year: It is evident that Smirnoff 80 Proof being on top of the list at the beginning of the year did not make it to the top 10 list at the end of the year. Furthering the Sale Analysis; Jameson Irish Whiskey gained up relevance and made it to the list of the top 10 stocked products of the year, possibly due to its sales attraction leading to more production hence restock, thereby sustaining sales continuity. Meanwhile, every other products remained on the relevant list all through the year; while Capt Morgan Spiced Rum took the head on the list; replacing Smirnoff 80 Proof.
General Product Sales: The Fast and the *Slow selling products dataframes present the Most and the Least purchased products from the inventories, thereby drawing deserving attention to the Fast selling products for a better sales continuity and stability, while, also, more attention to the Slow selling products so as to mitigate the sales traffic downness whilst moderate the stock (especially in terms of production and restock) until there is a positive uptrend in their sales traffic.
Monthly Sales: The uptrend sales in the month of January implies that there usually is more traffic in the month; way more than it is in February. So it is recommendable to adequately prepare the inventory for the period. Meanwhile the sales remained on the low throughout the February month. So it is recommended to monitor and reduce the restocking rate in the month of February to avoid overstocking whilst moderate to reduce the cost of production.
Revenue Rate by Vendor: The sales revenue by vendors report presents the sum of top 10 sales revenue as generated by each repective vendor. This is to include that these enumerated vendors' inventories should be marked and assigned for adequate supply with respect to their stock variance. While the sales by InventoryId further reveals the inventories with higher transactional traffics; to be considered for the follow-up and the restock proper.