Inventory stratification gives you a no-nonsense approach to looking at inventory. It helps gives you a baseline in order to avoid the blanket rules that most businesses apply and provides focus on what is important.
Inventory Management: A Cashflow Platform
Unlock the Power of Inventory Analytics
In our best-selling book we co-authored and published through the NAW on inventory stratification, we stress that NOT ALL ITEMS ARE CREATED EQUAL (and they shouldn’t be managed as equal!). The problem is that most distributors’ purchasing departments and inventory management personnel fail to act on this wisdom. The primary reason? COMPLEXITY! Most inventory models are far too complex, which makes it nearly impossible to actively manage several things at once – from SKU (Stock Keeping Unit) proliferation, to supplier performance, to discounts, to rebates, and to purchasing price variances in the marketplace. We turn this complexity on its head by offering a systematic, easy-to-comprehend model that can be rolled out, taught, and implemented company-wide to dramatically improve working capital (turns, GMROII – Gross Margin Return On Inventory Investment, etc.) and drive profitable growth.
Since its inception, we have implemented our inventory stratification model across hundreds of distributors and manufacturers in B2B industries across verticals ranging from building materials, HVAC, industrials, plastics, foodservice, oil and gas, electrical, electronics, grocery chains, and chemicals, to name several.
ACTVantage Approach & ROI
Our approach is rooted in helping distributors develop a sustainable analytics capability rather than simply deliver a one-time, short-term model or software application. Are they two different things? We believe so, based on researching more than 250 successful implementations of analytics engagements. Since publishing Optimizing Distributor Profitability in 2007, we have helped hundreds of distributors successfully implement inventory stratification. Over the years, we studied those implementations and asked the critical question: Why have our customers been able to sustain the benefits (order fill rates, service levels, optimal inventory levels, product-mix, profitability, etc.) of attempting to integrate analytics into their DNA?
What we realized is that it’s not just the quality of the tools or technology or software – though those are an important part of the mix. Firms that sustained the benefits of analytics have worked with us to integrate four critical sources of institutional capital – Process, Technology and Performance metrics and, most importantly, PEOPLE – to creatively develop analytics as a capability. Our platform and our framework is the result of this key learning. ActVantage clients routinely see an ROI of 200% or MORE—many times the investment with ActVantage—in as little as THREE months. The gains are realized through working capital, slow moving inventory, fill rate-induced revenue growth, and margin improvement.
Inventory Stratification Applications
Inventory Stratification Benefits
- Acts as an inventory management platform
- A bridge to devise buyer-specific goals
- A common language to drive working capital efficiency
- A tool to develop customer-focused culture
- An inventory playbook for spend / cost management
- Acts as an advisor for analytics-based strategies
- PREDICT at-risk A and B items
- PROVIDE product-customer-specific actions
- PINPOINT the next A items to build stocking pipeline
- Acts as a compass for Profitable Growth
- Establish a common language for focused actions
- Helps monitor working capital productivity and performance
- Focus on leading indicators than lagging indicators