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repeats itself. So how do we stay ahead of too high. It will begin to affect your service The solution to their dilemma usually
the game? level and your phone may ring a little less resides in setting the safety stock. Most
Our HITS report is an excellent tool in the often. How much safety stock should a distribution software comes out the box,
battle against rising dead inventory. As a distributor carry? True to the consultant’s metaphorically of course, with the safety
product begins to reach the end of its life credo, I will say it depends. Safety stock is stock set equally across the board. It is up to
cycle, it will fall lower on our report. An really there to cover us during times of the user to determine which products should
interesting bit of research, for those of us uncertainty. If we knew exactly when every be set higher and which should be set lower.
geeks who like to explore this stuff, would customer needed our product and exactly Do you remember the set up process of your
be to track the hits on a product from how much lead time it required to receive software? What was top of mind on the go
introduction to demise. In order to get ahead the product from our supplier, we probably live date? I would hazard a guess that setting
of the dead stock game, we should establish a wouldn’t need much in the way of safety. the safety stock properly didn’t even grace
terminally ill point on our report. Over the Thank God, we live in a world of erratic the top ten. By leaving in the factory
years, we have seen that 4 hits is a good supply and demand or we couldn’t charge the defaults, our package treated all items the
threshold for most hard goods distributors. prices we do. same. Thus, our fast movers sold out before
When a product falls they could be
below this threshold, you replenished and the
should consider converting slow movers kept piling
it to a non-stock status.
“How much shelf space are
up. Have I struck a cord
Go ahead and take a with anyone?
look at your list. How
many stocking items fall
you allocating to items that
Use the HITS report to
set your safety stock
into this category? How
much cash is tied up in
your customers are clearly
percentages. Give the
top 5% of your items, by
these items? How much popularity, a high
shelf space are you
allocating to items that
not interested in?”
percentage. A 100%
safety stock percentage
your customers are clearly is not a bad place to
not interested in? start. As items go down
There are some the popularity
exceptions to this 4 hit threshold. If you have I like to look at setting safety stock levels continuum, drop the safety stock percentage.
an item that is part of a bigger item, you may as a way to say yes to our customers as Once you reach the 50% mark on your entire
wish to keep this as an active SKU. For many times as possible. At the same time, inventory of active SKUs, ask yourself if
example, you should keep a repair part for the we need to balance this concept with our safety stock is really necessary. Why invest a
fastest moving air conditioner unit in stock. It financial responsibility to the company. In bunch of money in items that your customers
may fall below the 4 hit threshold, but when order to make the most customers happy, I are not that interested in.
you customer calls, you better be able to say should really concentrate on the items that Using this report and many others like it
yes. Just manage the on hand quantity of they buy most often. Enter our HITS report. will help you increase the return on your
these items. Sometimes we want to be able to One of the most common consulting phone technology investment. If you need some
fill out a display in our showroom. There will calls I receive goes something like this: I help getting started, or a sample copy of a
always be the oddball size or colour that fits keep running out of my fast moving items HITS report, send me an email and I will be
on the plan-o-gram. and I have a mountain of my slower moving happy to point you in the right direction.
Don’t try to raise the non-stock threshold stuff. Good luck.
Jason Bader is managing partner at The Distributor Team Inc.
The Distribution Team specialises in providing excellence in inventory management
training, business operations consulting and technology utilisation to the
distribution industry.
Jason has over 20 years experience in the distribution field, including 10 years
serving in an executive capacity.
He spent 4 years on the board of directors with STAFDA, and in his final year had the
honour of being the associations youngest ever president.
Jason can be contacted on at
jason@Distributionteam.com or go to
www.distributionteam.com
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