- You encounter frequent stockouts and lack a clear procedure for dealing with back-ordered items. You cannot track lost sales and do not have stock overages or safety stock. You cannot tell what percentage of safety stock you carry, and you have too many obsolete items which cost you too much money. You have difficulty determining what is obsolete. You have to carry slow-moving items for priority customers. You do not categorize your inventory by velocity/ABC.
- Your approach to deciding what to purchase is faulty. You do not get sales forecasts, or if you do, they are not very accurate. You lack a push/pull strategy and your suppliers do not drop-ship directly to your customers. You do not have an efficient way to establish inventory levels, and your methods vary by season. A certain percentage of your items are seasonal, but it is difficult to figure out this number, and sales/marketing does not update you on promotions.
- You do not have multi-site facilities, or if you do, you do not operate hub and spoke. You do not have centralized purchasing.
- Your order desk does not take orders for items that are not in stock. You cannot automatically generate PO’s for items on backorder, and the order desk cannot see items on PO’s and expected arrival dates. You cannot see the future orders for your purchase planning.
- You do not have vendor-managed or consignment inventory. It is difficult to figure out what percentage of your inventory is Managed/Consigned, and your method of communicating with your vendor/consignee is inefficient.
- There are issues with vendor requirements. You do not use EDI, XML, or some other protocol to communicate with vendors, or if you do, it is difficult to find out what percentage of your vendors you communicate with in this manner. You experience a high percentage of errors.
- It is difficult to keep track of vendor performance. Your method of tracking lead times, quality of products, and purchasing volumes/price breaks is inefficient.
- Your method of costing your inventory is inefficient. You cannot capture landed cost, and your method of capturing cost when you do transfers is inefficient as well. If multi-site, you do not have unique costs per site.
- You face the issue of poor vendor performance. You have difficulty tracking lead times, quality of products, and purchasing volumes/price breaks.
