Determining Inventory Levels With Forecasting Software

I recently had the pleasure of helping several of our clients establish better methods for determining levels that meet service level requirements while not carrying too much inventory. Distributors and make to stock manufacturers share a common challenge to develop a plan for how much safety stock to carry of each item and how much to procure or manufacture to ensure service levels.  Often the MRP (Material Requirements Planning) functionality of ERP systems does a good job of helping you to execute a plan, but does not help with the development of the plan.  Many of the built-in forecasting tools fall short as well.

Forecasting Considerations and Requirements

To bridge the functional gap, we look for forecasting and planning tools that can integrate in with the ERP software of choice.  We break the requirements down into the following categories:

1. Inventory stratification and service level definitions
2. Holding cost calculations
3. Lead-time
4. Sales history
5. Forecasting
6. Safety stock calculations
7. MRP that uses forecast consumption logic

Recent projects included the review of three different forecasting and planning tools: Slimstock, Rockysoft, and Forecast Pro.  Each of these packages import sales history and then utilize that history to generate a forecast.  The forecast can be smoothed and/or manipulated via built in models that allow the planner to focus only on forecast exceptions.  All three packages use the history and forecast to determine recommended safety stock levels and minimum order quantities to ensure that defined service levels are met.  The forecast, safety stock, and minimum order quantities can be fed/integrate with the MRP engine to then allow the material planner to easily execute the plan.

If you’re organization is struggling with inventory levels and forecasting, give us a call.  We can help your team review and select the best forecasting software for your unique requirements.