How effective min/max inventory management can help optimize inventory

What if you as a distributor could have a Vendor-managed inventory (VMI) app that told you exactly how much consignment inventory you should be stocking at your customers' sites? 

Or what if that same VMI inventory management app could be used to tell your customers how much they should be buying from you based on their current usage?

VMI apps with min/max inventory management help distributors optimize replenishment of consignment inventory at customer sites.  These VMI apps can also be used by a distributor's customer for automating replenishment of customer-owned inventory using min/maxes. Whether your consumable inventory is consigned or customer-owned, min/max inventory management can ensure you spend the minimum amount necessary to keep inventory in stock but not overstocked.

ERP Software Can't Track Min/Max Levels or Optimize Stockroom Inventory

ERP software can't tell you how much consigned or customer-owned inventory is needed because it doesn’t track on-hand quantities in customer stockrooms or service trucks. Neither does it track actual usage of consignment or customer-owned inventory at the customers’ point-of-use. But a VMI app with min/max inventory management can tell you how much inventory distributors should be stocking at your customers' sites. 

Min/Max Inventory Management Starts with Tracking Inventory Usage and Quantity on Hand

Good min/max inventory management starts with a VMI app that can track inventory usage with cycle counts or consumption pulls from inventory, usually with a QR code scanning app or sensors. At set up, you give the VMI app a minimum and maximum setting for each item in the stockroom. When cycle counts track that the quantity on hand level of an item has fallen below a minimum level, then an order is automatically sent to the distributor to replenish the item up to the maximum level.

Keep Inventory Levels Optimized with Dynamically Optimized Min/Max Levels from eTurns

Some VMI apps set themselves apart by giving users the ability to keep min/max levels dynamically optimized so that inventory is kept at optimized levels. This type of min/max inventory management ensures that companies avoid stockouts and ensure availability while keeping inventory costs as low as possible.

eTurns TrackStock is a VMI app that has this type of min/max inventory management.  TrackStock tracks on-hand quantities and usage at the customer’s point-of-use, giving the distributor and their customer valuable data that they can use to know how much inventory that customer needs on their shelves, and no more. Once the customer has used eTurns for at least 45 days to replenish their inventory, eTurns has enough data to calculate what optimum minimum and maximum settings should be. 

The eTurns Min/Max Dashboard calculates optimized min/max levels and inventory levels and displays the following useful data:

1. The optimum settings for each item 
2. The resulting inventory value 
3. How much cash can be saved
4. The current supply level of each item

By adjusting the slider bar on the dashboard, customers can learn the cash savings that would come from moving their current stock levels closer and closer to the calculated optimum amount of inventory.

Lower Carrying Costs with Min/Max Inventory Management from eTurns

Obviously, the one-time cash savings that come from optimizing and reducing the inventory level of each item is fantastic. But the savings don’t end there, because there are annual cash savings that come with carrying less inventory.

Inventory carrying costs include the costs of storing inventory in a warehouse and things like rent, utilities and warehouse employee salaries. It can also refer to costs such as insurance, perishability, or shrinkage. Essentially, carrying costs involve the costs you or your customers pay to keep inventory on hand. 

Inventory carrying costs typically run between 25-55% of the inventory value, so the annual cash savings from lowering those costs ends up more than covering the cost of the eTurns TrackStock software. Improve cash flow, reduce forecast errors and improve demand planning without watching money waste away on stockroom shelves.

Read more: How to prevent overstocking and understocking with eTurns Min/Max Tuning Slider

Min/Max Tuning Makes Consigned Inventory Surprisingly Inexpensive

Distributors often hesitate to offer consignment because of the perception it is too expensive, tying up cash in inventory at customer locations and increasing risk. But, combined with best practices, the eTurns TrackStock’s Min/Max Tuning Dashboard can make it much less expensive for a distributor to provide consigned inventory management to their customers.

Distributors who use eTurns have told us that the Min/Max Dashboard often lets them know they are stocking 3 times more inventory than they need in the customers' stockrooms.

If the distributor can remove two-thirds of the inventory at one of their consigned customers (since eTurns helps them optimize all items), they can redeploy that investment to two other customers who deserve consignment. Therefore, for the same investment, the distributor can triple his customer coverage for consignment.

Bottom-Line Benefits of eTurns

Distributors who offer eTurns to their customers as a value-added service for replenishing and optimizing stockroom and truck inventory increase same-customer revenue by around 30%. Other benefits include:

1. Decrease in procurement costs by up to 90%
2. Reduction in inventory levels and annual carrying costs by up to 73%
3. Decrease in shrinkage by 20-40%

When distributors provide customers with the value-added service of automated replenishment VMI/CMI through the eTurns TrackStock Optimize app, they give them the powerful Min/Max Tuning Dashboard tool that uses a customer’s actual demand data to optimize their inventory and saves them cash, not only in the first year, but on an ongoing basis. There is nothing that builds loyalty like saving a customer money.