By: David J. Burch


Elucidate is a powerful solution for companies that hold physical inventories in an amount that is significant to them. A typical overall outcome is greatly improved availability using half the normal inventory. It does not matter whether the inventory items are raw materials or finished goods or how many places they are stored. Elucidate's capability to signal when not to produce, directly reduces work-in-progress inventories for manufacturers, along with congestion in production, effectively increasing production capacity. For resellers and retailers, surplus inventories are not ordered while the flow of active items is increased.

We are able to quantify some of your benefits from Elucidate through retroactive simulations. Pick 5 movers – products that are too often out of stock and ones that produce gross margin dollars rapidly. Then pick 20 more SKUs which are representative of your medium and slow moving products. Improving product availability is meaningful. Doing so with significantly less inventory investment is even more important. In fact, it constitutes a decisive competitive edge.

Two types of data are needed to run a simulation: information about the product and inclusive transactional data between two dates. The information needed about each product is:

• A unique product descriptor – this can be a name, number or any other designation
• Quantity on hand before the starting date
• Quantity on hand after the ending date (technically not necessary but allows us to verify that the transactional data is complete)
• The cost of the product
• The price of the product (if applicable, as this allows us to quantify lost margin)
• The average time it takes for the product to be replenished (calendar days)
• The number of days that replenishment might be late (calendar days)
• The minimum order quantity (if any)

Only four fields of transactional data are needed. This data can be in any convenient format, see Figure 1. We need the transaction date, the same unique product descriptor noted above, the number consumed and the number received. Multiple entries for a day and zero entries are fine. Examples of acceptable formats are shown below.

See Figure 1 in Whitepaper.

It is best to have a year's worth of transactional data to show any seasonality. When replenishment times are long, it is preferable to have ten or more replenishment time's worth of transactional data. Starting with the beginning on hand quantity, if you subtract all the consumptions and add all the receipts, the result should equal the ending on hand quantity.

See Figure 2 in Whitepaper.

The Figure 2 above shows a typical sample simulation. For this one product there was over $100,000 of inventory reduction without shortages (see subheading).

It is IDEA's sense is that there is only one reason for inventory – to support sales. Inventory can protect sales in two ways: through availability and increasing the available range. If there is enough inventory to protect sales, having more is a waste. In total, these elements dramatically increase profitability and financial health. Send DavidBurch@IDEAllc.com data on your products. We'll quickly respond with your simulated results that are specifically applicable.