Often, as a CFO, we would like to lower the inventory value, the inventory bindings, and often as a CSO or sales officer, we would like to raise the service level, and that is of course a classic conflict within supply chain management. And with the graphical profile, it’s possible to view the inventory profile on different items, including history, and that’s a good tool when you’re discussing the service level and inventory bindings and when you are updating your planning parameters on items.
So for instance, on this item number 1000, if I include history and my profile looks like this, the sales officer might argue that we had a period with the inventory of only one and we even have a situation where it’s not possible to deliver. So this is our history, and therefore we might want to raise the service safety stock on this item, or at least keep it as it is here.
Whereas if we run the next item and we look upon that, which is also an expensive top level item, we can see that the lowest point in a two years period is actually 10, and we might discuss if we could lower the safety stock level to 2 or 3, since it’s more or less stable. The further down we get in the item hierarchy, going closer to purchase items, the profile might change because a purchased item could go into many production items, and it seems even more stable. And we could argue that for this item profile here, where the lowest inventory is 24, and it seems that it will never get below that, you might lower the safety stock because the colored area below this graph reflects your inventory value or your inventory level in average.
Let’s take a last example here, which is an item that is clearly bad, so it has a very high safety stock and this could be lowered. So in this way, it’s possible to see how many supplies and demands do we have. Should we have fewer supplies? Is it okay that we are ordering this one as often as we’re doing here? Should we have higher peaks and fewer supplies, and should we lower the safety stock? So it’s a good input for discussing your reordering parameters to affect your service level and inventory findings.