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METHODOLOGY - Data Analysis

Electronic Data Analysis Project

Electronic Data Analysis can provide a wealth of information to your company concerning the nature of customer orders and your inventory environment.  Strategies can be developed based on historical customer order patterns to improve order picking efficiency and to better prepare for peak order periods.  On the inventory side, analysis can be done to re-evaluate inventory levels and establish optimal stock quantities.  On the storage side, analysis can be done to segregate product by historical velocity, so that the products that move fastest are placed in the easiest to get at areas of your facility.

Can Stand-Alone or be Part of Optimization Project  

Data analysis is not done on every optimization project, but it can be done as part of the effort.  If you have historical order data, data analysis can help you to see patterns in your order data. Data analysis can also be done when inventory is highly disorganized, large variability in orders occur, or high sustained order levels are encountered, or it is suspected that inventory levels are much higher than they need to be.  If data analysis is to be done, it is normally done as part of the process to define the Design Criteria for the project.

Review of Customer Order Data

The most common type of Data Analysis done is the analysis of customer order data. Unlike aggregate sales information (which tells how many $$ or units of a SKU have been sold), order data analysis tells things like 1) how big is the average order, 2) what is the variability in order size, 3) what are the fastest movers at different times in the year, 4) what items are ordered together, and 5) what customer sub-sets order most of the products. This information can prove invaluable in developing new strategies for order picking.

Review of Inventory Data and Comparison to Demand History

Customer order data provides a demand history for inventory. Correlating this information to observed inventory levels, 2wmc can determine the optimal stock level for each inventory item. These levels may vary during the year based on seasonal demand trends. You need to provide input on the desired level of service (probability of stock-out).

Facility Sizing Based on Data and Growth Assumptions

Once optimal stock levels have been determined, 2wmc can then use product cube (if available) to determine the cubic storage requirements for the optimal amount of stock. Once cubic requirements have been determined, an appropriate storage medium can be selected for each stock item. Once all stock items have been designated to a type of storage, general equipment and facility space requirements can be determined.

Planning for Future Growth

2wmc can also plan for your future, by making sure that growth trends are included in our analysis. We can leave expansion space in you facility or we can specify growth adjusted space and equipment requirements.

Product Slotting Recommendations  Based Upon History

2wmc can recommend slotting requirements for each SKU in your inventory based on order history. The total number of SKUs and a list of those SKUs can be given for each storage category.

On-Hand Inventory Optimization - Optimum Stock Quantity

If desired, 2wmc can perform a more in-depth analysis of inventory levels based on a standard-deviation analysis. This type of analysis takes into account demand variability over a period of time in order to determine a particular level of service for items in a particular stock class. Recommended stock levels can be set for every SKU in your inventory.

ABC Movement Analysis

In an ABC movement analysis, stock items are separated into 3 or more categories based on their demand requirements (fast movers, medium movers, and slow movers). Each category of product will have particular service level requirements. Generally speaking, slow movers will have higher average on-hand quantities, and a lower service level need. The specific customer service levels required are determined by your team.

 Strategies and Recommendations for Working with Suppliers

2wmc can provide recommendations for dealing with your supply chain vendors. Although this tends to be outside control of the warehouse, it is often helpful to get the organization as a whole to consider the costs of having too much or too little inventory in the distribution center. Sometimes, simple changes in order habits can result in substantial savings in terms of inventory cost and customer good will.

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