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hello my friends this is eduard in today's video i'm going to explain to you how to improve and optimize your inventory quickly this is one of the challenge of my life to find a balance between inventory and service and you know that inventory is important for the service but it's also a huge impact on your cash flow and under the profitability of your company and most of the time or we have too much inventory or we don't have enough and we have this kind of yo-yo effect every year every month and that's kind of exhausting we feel like we're working like firefighters no one is really happy in the company and outside the company our customers are always complaining because there is not enough maybe the marketing department is also complaining your boss is coming to your office and say look edward we have too much said what what what is your action plan for tomorrow to make sure that we finally find this balance point so in this video i'm gonna give you solutions to really start optimizing your inventory today [Music] so the first solution obviously is to track your performance this is the most obvious one but i can see that many companies are not tracking properly the performance and you cannot improve what you cannot track and the two main kpis for that is to track the customer service so it could be the fill rate or the availability rate and on the other side i really recommend to try the inventory turnover for that i have two specific tutorials on youtube so please check these two videos if you want to know more about this too so i'm not going to spend a lot of time but if you don't start by tracking it will be impossible for you to optimize any inventory management policy so that's the first one the second one is to really focus your time your energy and money on what we call the 2080 what is the 2080 is based on the abc classification the pareto analysis and this classification will give you what are the most important products you need to focus if you want to improve in the same time the service and the inventory level so please check this video if you want to do it immediately it's only 10 minutes for one classification then the third step is to clean your what we call slow and obsolete stocks we call that slob s-l-o-b so how to clean your slob the first step is to identify you obsolete stock because i can tell you i've done a lot of consulting the last few years and i always ask okay can you give me the list of your discontinued products and it's not it's not easy you don't have most of the company you don't have a clear list of what is obsolete and also what are the what we call the slow movers base for example on the inventory turnover now the the slow movers is for example you have more than 150 days talk or more than one year stock you need to identify these two categories and then you need to take actions quickly the first one is to conserve current orders i can tell you many companies they have a lot of stock but they still have orders coming or they have manual orders because they have manual parameters in their erp system for example so cancel all these current orders on your products then try to return products if it's part of your supplier policy you can always try if you cannot obviously you need to promote these products to make sure they sell faster and the sooner is the better i also recommend you to cancel any new products that is supposed to replace these slow movers for example if you have one product with one ear you still have one ear of torque i would recommend to postpone the new one to avoid to to have too much promotion or destruction then if you cannot the promotion is not good enough you can donate this product when i was in the the cosmetic industry or the food industry uh we didn't want to just trash this product so we were going to a donation because at least someone could use it and the last step is to destroy this product this is for me the worst scenario but we have still a lot of companies in this world who are putting in to try so many products billions of products in this planet especially on the food industry so i would really recommend you regarding this to be to track this as frequently as possible and to be proactive because most of the companies we wake up too late and when it's too late it's most of the time we we lose a lot of money because we're not proactive so please make sure you are the next solution is to accept shortage on low sales or recall c codes it's completely okay not having 100 percent of service or availability rate this is mathematically impossible to reach 100 of service level for your customers you will need an infinite stock so i always recommend you to target a better service for your top sellers than for your products with for example less sales and also less profit i was giving this example in one of my previous video the top sellers need to like for example these acres are much more important than the c-codes and it's completely fine if you have 80 of service in these products but you need to have close to 100 of service in your most basic products in your stores factory or where else okay this is obvious but i can tell you that for sales marketing department this is not obvious and you need to explain that as many times as uh they need to make sure that we are on the same page and this is part of so when i was a cnop manager to do a lot of education around that the next step is to reduce the number of products once again it doesn't mean that you have a lot of products that you sell much more the best example for me is apple apple has only one iphone so they have three size and three colors more or less it really depends every year but this is very little compared for example to samsung or all these brands who are selling hundreds of different smartphones and at the end apple is focusing all his cash energy design marketing on one product and it's much much more efficient in uh in many ways as you can see today so i really recommend you to reflect because you will always have the push from marketing sales and the product team to make sure that they have more products and for them because for them it's also more work and more creativity but sometimes and most of the times we forget to cancel all projects so for me the the simple words is when you have a new product coming we need to consider at least one if you're in a very critical inventory uh way i will when i create one i will cancel two that's my recommendation and i can tell you you are not amazon i mean unless you work for amazon today but amazon is an amazing company very efficient but they only store and buy the products that have the most profits and the most volumes but what we call the long tail like the the small volumes they don't take the ownership and the responsibility they have millions of sellers that will take the risk for them so you are not amazon i'm not amazon either so reduce your offer and if you want to know more about it you can check for example my inventory turnover ratio and i give the example of apple versus samsung samsung is not the same business model but it's a great example to compare in this way number six improve or at least start your sales and purchase forecasts most of the companies today they don't even have forecasts i can tell you and it's never too late to start you can start focusing your demand your new products you also have to focus your purchase which is different from the demand and your replenishment i will always recommend to focus on your a and because the most important products the 20 of the items that represent 80 of your demand i will also make sure that you track your forecast accuracy properly and then you can optimize and improve your your models and your focusing models to make sure that you are going into the right direction before also automation because automation for me is the key it's not possible to focus thousands of products in them in an accurate way if you don't automate at one point so if you wanna start i recommend you to check my video how to focus with excel in three clicks and we also have a lot of content regarding focus accuracy kpis and i plan to do much more content around that later so don't forget to subscribe if you want to know more about this very strategic skill number seven you have to reduce your minimum order quantity i'm gonna give you a very specific example let's say you want to buy these nike issues your one year forecast is android quantities for your store but your suppliers say no eduard you have to order minimum 500 quantities for this specific size so you need to have for example one full pallet or one full container and that's something very very classic i can see in many many industries you want 100 or 500 so at the end your supplier will will push you five years of inventory and i really recommend you to check what is your inventory turnover not based on your focus but based on your minimum order of quantity that could be a game changer for your inventory level and you have different options or you negotiate or you try to optimize the the container or the transport or you can also change your supplier if it's way too much for you number eight you have to mitigate the level of uncertainty for your demand and for the lead time so i was talking about that in previous videos but you have different level of uncertainty for your products so it's very important to classify these products i recommend for example to use the abc xyz analysis you can check my my video for that and you can have different inventory management strategy based on the level of uncertainty the volume and also the profits of your product this is just one example you have many different way to use it but please check my video if you want to know more about it you also have to be very cautious of the lead time uncertainty for example between your factories because of the transport because of the custom the reception you have a lot of uncertainty and you need to classify you need to evaluate this level to make sure this is part of your inventory management policy and your safety stock policy so if you want to know more about it please check this video the best formulas for your safety stock you will know more about this level of uncertainty then i really recommend you to reduce as much as possible and stabilize your lead times so the lead times is not only about the transport is coming from the review period how often are you ordering stocks to the i.t confirmation of your purchase order you the the supply of your components the production the picking and the packing your warehouse the waiting time to transport the custom the transporter again the delivery the i.t confirmation in your erp this is your totally time and what is really important is first of all to make sure it's as stable as possible and also make sure it's as short as possible because the longer is your lead time the longer will be your replenishment formula and the longer also the higher will be your safety stock value to make sure that you you will face this level of uncertainty so make sure first to track it properly and once you have more visibility you can really focus on the most important and the the the part of the lead time that you feel you can stabilize or reduce number 10 we are getting closer i recommend you to centralize your inventory so i've been working on a lot of logistics and distribution centers optimization in the world in europe in china and in america latina and i can tell you that it's always you will always think it's a good idea oh let's open a new warehouse to get closer to the customer and improve the what we call the outbound transport but many people forget that the more you have distribution center and like storage point the more you will increase automatically the level of inventory because of the the complexity and especially the minimum of order if you need to deliver minimum one pallet to one distribution center you will increase a lot the complexity and some distribution center just by sending one pallet will be maybe one or two years of talk so i recommend to keep it very simple if you have this kind of network big dc this is this distribution center and small ones keep it simple reduce it and you will see you will automatically and naturally you will have much much less inventory and much less safety to guarantee the same level of service most of the time when you move from this kind of structure to this one you will even improve much more the level of service because you will have much less problem of repetition around your network so for example zara is a very good example and i'm gonna do a specific video about this company but keep it simple even you can even cancel these two and i only have one point of storage you may pay a bit more in terms of transport but you will save so much in terms of inventory and shortage for your customer and the last one is make sure you automate your inventory management you don't want to have these people working 12 hours a day like this cat sending 200 emails having 10 hours of meetings and fighting with every department the most important supply chain is really to spend your energy your time and your fun in analysis and decision making 95 of us we still have a lot of stress and it's very stressful because we play with too many data too many people too many spreadsheets too many european different system whatever you're using sap netsuite serge manathan orecko focus your energy first to build like maybe uh like a prototype i love to use excel just to make it as fast as possible and then when it's ready if you have the budget we use with developers we automate into erp wms or whatever the system you are using so try to avoid repetition as much as you can and that will completely change my life it changed completely in my life because i was really focusing on this kind of projects the last 10 and 15 years so my conclusion today is your action plan once again i will really recommend you to pick one of these 11 solution then what you're going to implement today i really focus but maybe you want to reduce the moq maybe you want to centralize your inventory maybe you want to start tracking your performance that's the third step anyway track your performance and then once you will see the result you will be able to optimize even more maybe pick another solution but at the end try to keep it also very simple because the simplicity for me is the best solution to improve your inventory and your service level so i hope you enjoyed this video if you want to know more about it you can watch all my tutorials i have a lot of tools and excel that you can download like the eoq and wilson formula the safety stock uh the abc xyz analysis or all these kpi around the supply chain like inventory or service level please don't forget as well to subscribe and if you want to go to the next level i have a new workshop and in this workshop i'm going to reveal my best tools my new spreadsheet and also the the best strategy to reduce your inventory and shortages and also i'm going to review the 13 parameters you need to master if you really want to go to the next level so i'm going to put all the links below this video thanks for watching again today i wish you a beautiful week and good luck with your inventory [Music] you