Inventory Optimisation

Client / Profile:

Canon Australia (consumables)

Issue:

Canon used TAARS Pty Ltd expertise to balance the stock of a key retail customer to ensure high in stock levels.  This was to prevent customers moving to “no name” substitutes when the retailer was out of stock.  .

Cause:

A standard “min / max” safety stock strategy was being used across all branches regardless of the individual sales variability

Store specific sales variances were not picked up quickly enough to avoid stock outs.

Response:

Implemented a hierarchical forecasting module, over laid with forward promotional plans. This forecast was then subjected to a “Mean square error” safety stock calculation to derive an optimal quantity for each product in each branch.

Outcome:

• Reduced inventory investment by the retailer
• In Stock availability increased from mid 80% to 99.5%
• Anecdotal evidence of reduced brand switching

Learning:

Selection of the correct Safety Stock strategy is critical to delivering high instock with low inventory.