Using SupplyVue the team segmented the demand between basic and promotional products. Using a modelled forecast accuracy generated by the statistical algorithm from basic items, SupplyVue calculated the required inventory policies at the central warehouse and recalculated the corresponding inventory levels at store (based on a Kanban pull mechanism from the central inventory).
For these items the demand profile is stable and predictable enough so that even with an overall reduction in the total inventory in the network there is enough cover at the central warehouse to eliminate air freight caused by inventory shortages. Promotional items should continue to be managed separately as at present.
Even though the safety cover at the central warehouse was set at a high level (99%) cover there is still the chance of stock-outs. So these situations need to be predicted and managed.
SupplyVue’s planning and analysis capability should be used to predict the products with the high chances of shortage based on latest forecast and provide an evaluation of the likely margin lost before the next planned replenishment and compare this to the cost of air-freight. This allows managers to take an informed decision on whether to air-freight or not.