Making smarter inventory decisions

Posted August 8, 2021 by Clark Wilkins

Today we posted an update to stockd to improve the quoting system, and this led to a discussion about optimizing inventory decisions. The purpose of this article is to show you three every day actions you can take, and how we help you make them happen.

Quoting the right items

Let's say you are quoting an item which is in stock, but in a distributed way. Some items are in your local warehouse, and others are available from locations such as vendor sources, or are either in remote locations or in use. These are important considerations, because you don't want to quote something you can't provide on time.

In stockd, we consider:

Item condition has been a prime factor in adding quote items since the initial release. We have always shown you how many good and bad condition items you have in inventory. What's been in development is the concept of recognizing that outside locations are not controlled and continuously managed, and you don't inherently know that the item is actually available. Consider this quote where we are adding temperature controllers.

Item search shows available counts by condition and location status

At a glance, we know:

Presented with these facts, we know some additional research is needed to make sure we can supply what we're about to quote. Depending on the situation, it might be desirable to initiate some inventory transfers (uncontrolled to controlled locations), or reserving the target items to make sure the quote can be fulfilled.

Making efficient order choices based on availability

It's often the case that an order has to be filled quickly, so availability of the ordered items is a prime consideration. In this case. you're going to want to consider the location. If the item is not in a local and controlled location at order time, you have the additional time overhead involved in verifying the item is still available and getting it transported to the desired location. In the following screenshot, we are adding items to the order, and the search results are helping us to decide which items should be linked.

Item search shows all available items to fulfill this order

The most desirable items in this list are the first two — both of which are in controlled locations and have good status.

Making efficient order choices based on inventory valuations

A second consideration, but no less important, in order fulfillment is the inventory value of the items added to the order. All other things being “equal”, if you can add item B instead of item A, and B has a larger “sunk cost”, this is the desirable action. The reason is that the transfer of this item from inventory will discharge this cost from the balance sheet.

The concept of item cost sources is illustrated in depth in this blog post from 2020.

In the screenshot below, you can see that item 23544 has a current value of $1953.60, while item 23545 has a value of $2384.52. In this situation, where both items are in good condition, and residing in controlled locations, the second item has a significantly better impact on inventory valuations (and positive income tax effects), so it's a more efficient choice.

Choosing the item with a higher inventory value

Conclusions

In this article, we showed three ways stockd helps you make smarter and more efficient decisions on the items you are quoting, and the items that fulfill your sales orders. Please have a look at the articles list for more tips on managing your inventory, and how our tools make your business function better.



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