Inventory and Purchasing Optimization
Demand Forecast and Stock Optimization
SOLO is an inventory optimization and purchasing system intended for wholesalers and chains with large flows of goods and many inventory locations that acts as a complement to existing business systems.
The objective of SOLO is to achieve the chosen service level at the lowest costs, or expressed somewhat differently, to be at the right place at the right time.
Inventory optimization for wholesalers and distribution centres
SOLO was developed by PromoSoft in collaboration with Professor Sven Axsäter at the Department of Industrial Management and Logistics at Faculty of Engineering LTH.
SOLO includes three functions:
Determination of forecasts and evaluation of forecast errors
Optimization of inventory levels through reorder points and order quantities
SOLO is an add-on to a company’s existing business systems. A single person can manage a very large number of items, even at several warehouses, and calculate inventory levels and purchasing quantities, as well as ordering. The calculation of inventory optimization is fully automatic. The user has a monitoring function and reacts to deviation signals by the program.
Inventory and purchasing management methods automate the purchasing process and dramatically reduce the amount of routine work relating to call-offs.
Various product ranges should be managed in different ways. With our methods, we begin with an A-B-C listing of the product range. Once this is done, the product range is divided into various groups based on volume, value of goods, and incidence. Strategic service levels are determined for the various groups.
To update the demand forecasts sales data are imported from all stocks, which are controlled by the inventory control system. SOLO determines updated forecasts and evaluates forecast errors for each item. Trends and seasonal factors are taken into consideration. The user is informed if the forecast error is above a certain limit.
In order to be able to foresee the results of the parameters set, there is a simulation function that uses graphs to depict effects on inventory resulting from future demand, turnover rate, order frequency, inventory value, order quantities, order points, and other factors.
If a deviation from the forecast exceeds certain limits, the user will receive an alert. Taking the correct actions will restore the calculated forecast to within allowable limits. When the forecasts are correctly calculated, they optimize the calculated safety stock, and lead time stock applicable to the service level chosen, with regard to inventory economics.
The forecast is recalculated for given suppliers, and is shown online on a page where the supplier can read an order chart for a rolling twelve-month period. The file can be downloaded to the supplier’s business system.
SOLO has an order point ordering system that is updated directly from the calculations. Inspection of the inventory situation is done either continuously or at selected intervals. Multiples, free delivery minimums, packaging multiples and other factors can be taken into consideration. For purchases from the Far East, cargo optimization can be used, which simplifies filling a container, for example.
The campaign management module simplifies planning and ordering of campaign orders. The fact that these do not affect forecast calculation ensures complete freedom to create temporary order peaks without affecting the normal stock level.
The system we developed serves as an add-on to existing business systems and store data systems. All data exchange is done through file transfers, so you avoid difficult integrations. Our customers work with Jeeves, Navision, Scala, Dynamics AX, NAV, etc.
SOLO Inventory and Purchasing Optimization
Scientific inventory optimization is about a few basic parts:
Calculation of demand during lead time - forecast
Calculation of demand variation - forecast error
Monitoring of lead time - lead time variability
Determine the level of service
The optimal safety stock and optimal lead-time inventory is calculated.