Know which Items are likely to Run Out or are Over Stocked
Inventory Cover is a clever calculation to automatically show how many weeks of future sales you can "Cover" by selling the current Inventory on hand.
This report is dynamic, so if some items start to sell faster than before then the Weeks Cover will drop quickly. This is often a better indicator it is time to re-order than say setting Minimum inventory quantities and trying to maintain them.
Using the Cover method can also be better at identifying over stocked items especially where the item may still be selling but very slowly.
This Article covers the following:
- When Items are Selling out Weeks Cover shows as Low
- When Items are Over Stocked Weeks Cover shows as High
- Visualise to see slow moving Inventory problems more clearly
- Other Filters to Focus on Different Item Groups or Suppliers
- How Inventory Cover is Calculated
1. When Items are Selling out Weeks Cover shows as Low
The lower the Cover Base number the less weeks of future sales you have in inventory on hand.
Run the Favourite Inventory Cover - No. Weeks sales on hand.
The Favourite can be used to:
- Sort the list using the Order by Cover Base 8 - Ascending
- Shows Items that have only enough inventory on hand to cover a week, two or three of future sales
- Shows for each item any outstanding PO's On Order already issued if not then it is time to re-order
- Shows for each item if there are other Customer Orders Committed
2. When Items are Over Stocked Weeks Cover shows as High
The higher the Cover Base number the more weeks of future sales you have in inventory on hand.
Run the Favourite Inventory Cover - Over 6 months sales on hand.
The Favourite is:
- Filtered to show items where there is enough inventory on hand to "Cover" 26 weeks of sales (Cover Base 20 is > 26 weeks)
- Is based on the actual rate of sales made over the past 20 weeks (longer period)
- Change the Filter to pick up a longer (or shorter) Cover period e.g. 52 weeks to show over 12 months of sales on hand
- Change the Filter to use Cover Base 8 to use the actual sales rate achieved over the past 8 weeks (shorter period) instead if more recent sales activity is more meaningful
- Change the Order by field to sort any column highest to lowest
3. Visualise to see slow moving Inventory problems more clearly
Rather than a long boring list of slow moving items, sometimes it is easier to see the key problem items using a visualisation.
Focus your attention on:
- Run the Favourite VDB: Inventory Over Stocked - Over 6 months SOH
- High $ value tied up in inventory not selling well
- Over stocked where you have over 6 months of future sales in inventory on hand
4. Other Filters to Focus on Different Item Groups or Suppliers
Core Products versus Ad-hoc or One-off
You probably have some core inventory groups that you never want to run out of and others which are more ad-hoc or where items are only ordered in to meet customer orders.
To identify and then filter to exclude these types of items:
- Add core products and ad-hoc products to separate Inventory groups;
- Filter to Exclude or only Include specific item groups
- Learn how to Filter to exclude certain things
Suppliers with different Lead times
You may also have suppliers or products with different Lead times. If so then you will want to set different Cover weeks for suppliers with longer lead times.
To identify and then filter to focus on these items:
- Add Lead time as a Custom field to each Item
- Add the Custom field to display on the report using +/- Cols
- Filter to focus on this item group
- Learn how to Filter to select certain things
5. How Inventory Cover is Calculated
Inventory "Cover" is calculated using past sales activity, as the total number of future Weeks of sales you can "Cover" based on your current inventory on hand.
- On Hand - Inventory Quantity currently On Hand
- Sales 8 Wks - Total sales quantities over the last 8 week period (shorter period)
- Cover Base 8 = On Hand / (Sales 8 Wks / 8)
- e.g. where On hand qty is 40 and Sales for the past 8 weeks total 80, on average you are selling 10 items a week, so 40 on hand will Cover another 4 weeks of sales, assuming sales continue at an average rate of 10 per week.
- Calculation of cover Base 8 is = 40 / (80 / 8) = 4 weeks
- Sales 20 Wks - Total sales quantities over the last 20 week period (longer period)
- Cover Base 20 = On Hand / (Sales 20 Wks / 20)
- e.g. where On hand qty is 40 and Sales for the past 20 weeks total 120, on average you are selling only 6 items a week, so 40 on hand will Cover another 7 weeks of sales, assuming sales continue at an average rate of 6 per week.
- Calculation of Cover Base 20 is = 40 / (120 / 20) = 7 weeks (6.7 rounded)