Frequently Asked Questions

The decision to adopt Make-to-Stock (MTS) or Make-to-Order (MTO) strategies for a stock-keeping unit (SKU) hinges on various factors that influence production and inventory management. Items with stable and predictable demand patterns are well-suited for MTS, as production can be planned in advance to meet forecasted demand. MTS reduces lead times and production costs by producing items in bulk and stocking inventory to fulfill anticipated orders promptly. On the other hand, highly customized or low-demand items are better managed through MTO strategies, as production is initiated only after receiving customer orders. MTO minimizes inventory holding costs and reduces the risk of obsolete inventory by producing items based on specific customer requirements. Other factors, such as production lead times, production flexibility, customer preferences, and supply chain complexity, also play significant roles in determining the most suitable strategy for each SKU.

Inventory wastage, arising from factors like overstocking, obsolescence, spoilage, and shrinkage, poses challenges to profitability. To address these risks, businesses employ strategies in inventory management. Demand forecasting aligns inventory levels with actual demand, while efficient techniques like just-in-time (JIT) systems streamline processes. Regular audits maintain accuracy, and advanced tools like safety stock analysis and inventory projections optimize levels. Product lifecycle management identifies slow-moving or obsolete inventory for targeted liquidation. Integrating these methods minimizes holding costs, optimizes turnover rates, and maximizes profitability.

The optimal sourcing location for ordering products depends on factors like supplier reliability, lead times, transportation costs, quality considerations, and geopolitical factors. Supplier evaluations help identify reliable vendors, while analyzing total landed costs determines cost-effectiveness. Proximity to markets and geopolitical stability also influence sourcing decisions. Additionally, whether to order locally or globally depends on supplier lead times and costs, with businesses balancing factors like transportation costs and reliability. By considering these factors, businesses can optimize their supply chain operations and gain a competitive edge.

Lacking inventory visibility in supply chain management can lead to a range of negative consequences that impact operational efficiency, customer satisfaction, and overall business performance. Without real-time visibility into inventory levels, locations, and movements, businesses may experience stockouts, overstocking, and inaccurate inventory records, resulting in disruptions in production and distribution processes. Stockouts can lead to lost sales opportunities, decreased customer satisfaction, and damage to brand reputation, as customers may seek alternative suppliers capable of fulfilling their orders promptly. Overstocking, on the other hand, ties up capital in excess inventory, increases holding costs, and exposes businesses to the risk of obsolescence and inventory write-offs. Inaccurate inventory records can lead to discrepancies between physical and recorded inventory levels, making it challenging to fulfill customer orders accurately and efficiently. Furthermore, lacking inventory visibility hampers the ability to forecast demand accurately, plan production schedules effectively, and optimize inventory levels, resulting in inefficiencies and increased costs throughout the supply chain. By investing in inventory management systems that provide real-time visibility and analytics capabilities, businesses can mitigate these risks, improve operational transparency, and enhance supply chain performance.

Managing declining demand for a product requires proactive inventory management strategies aimed at minimizing inventory holding costs and maximizing profitability. One approach is to implement promotional activities, such as discounts or bundle offers, to stimulate demand and encourage sales. Adjusting pricing strategies, such as implementing dynamic pricing or tiered pricing structures, can also help align product pricing with market demand and increase competitiveness. Liquidating excess inventory through clearance sales or liquidation channels can help clear out slow-moving or obsolete inventory and free up valuable warehouse space. Repurposing products for alternative markets or applications can help tap into new customer segments and extend the product lifecycle. Additionally, optimizing production schedules and inventory levels based on demand forecasts can help prevent overproduction and reduce excess inventory accumulation. By implementing these strategies, businesses can effectively manage declining demand for a product, minimize inventory holding costs, and maximize profitability.

Inventory aging is calculated by analyzing the age of individual inventory items based on their time in stock, typically measured in days, weeks, or months. This information is used to categorize inventory items into different age brackets, such as current, aged, or obsolete, based on predetermined thresholds. By tracking inventory aging, businesses can identify slow-moving or obsolete inventory that may require special attention or liquidation strategies to prevent obsolescence.