FEATURE
Inventory: think lean when it comes to stocking up

Does your company view inventory as a necessary evil that continually needs to be counted, stored, identified and shipped out? Does everyone seem to behave on a reactionary basis, putting the warehouse on a diet one minute and fattening up the bins another? Or, is inventory viewed as an opportunity to actively manage the business and drive costs down to affect the bottom line?

If you or your customers relate to these questions, read on. RockySoft offers a six-step solution to help you improve your process for a leaner inventory management system. The six steps are:

1. Understand and characterize the demand for your products
2. Characterize your supply and inventory costs
3. Stratify your inventory
4. Establish goals for each category of inventory
5. Develop a process to track variation from goals
6. Refine goals and adjust processes to remove variation

In this newsletter we will tackle the first step, understanding and characterizing the demand for your products. Be patient, lean inventory management is not something that happens at once. It's a method filled with multiple steps that lead to better process refinement all around.

STEP 1. Understand and characterize the demand for your products
Don't play the hit-and-miss game

Unfortunately, most companies use a blanket safety stock strategy and procure products weeks or months in advance to anticipate customers' orders. This philosophy can drive up the cost of doing business. Many supply plans are developed using educated guesses as to the "possible" need for products. If estimates are incorrect, a business can end up with inventory levels that are too-fat or too-thin, and consequently, create a "disconnect" between the supply and the actual demand for product.

To get a handle on inventory, start with a basic understanding of a product's demand. RockySoft divides demand into four understandable elements: randomness; trend; seasonality and business cycle. When viewed separately, these elements become easier to interpret and manage. Of the four elements, randomness is the most essential to target since the others are predictable and controllable.

Randomness - also known as forecast error -- is characterized by that element of the demand stream that is unpredictable. Defining the unpredictable elements of a product's demand stream is key to tackling this element. Why? Because the unpredictable component of the demand stream is the primary reason for stock outs or excess inventory. In order to offset the negative effects of forecast error, stocking strategies must be developed to mitigate the risk of stock outs and excess inventory.

Stocking strategy: You can reduce inventory by as much as 30 percent when you develop a stocking strategy that combines a safety stock (SS) or reorder point (ROP) level with the predictability of the demand stream. Safety stock levels can be determined using automated forecasting software, such as RockySoft's Demand Manager, which can generate recommendations for safety quantities and reorder points at an optimum level.

One can argue that forecasts are always going to be wrong, so why put much effort into it. While there are diminishing returns in spending too much effort on forecasting, there can be large returns in lowering the forecast error for long lead-time items. The trick is to use the right inventory management software package that can help planners purchase accurate levels of inventory, and, become alerted to inventory levels that become out of sync and need adjustment. The result is going to be satisfied customers and shareholders.


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WHAT'S NEW
Convergence 2005
Microsoft Customer Convergence 2005, San Diego, California - Convergence 2005 is the premier event for Microsoft Business Solutions customers. This year we came together for an intense four days of sharing ideas and exploring ways that would increase the efficiency of your business now and in the future. The event was topped off with an announcement that RockySoft, in conjunction with Fins, Furs and Feathers (also known as Marine Depot), was a recipient of the 2005 Pinnacle award for Excellence in Innovation.

A Window To Your Suppliers' Worlds
03/07/2005 - By providing midsize businesses and their suppliers with equal access to critical information, portals can help streamline the procurement process and ease vendor management woes. Microsoft Insights.
* Must register with Microsoft to view the Insights newsletter

New Clients
Road Town Wholesale with a compliment of two hundred and seventy employees, RTW has maintained its leadership position as the British Virgin Island's largest and most successful wholesaler and retailer of food, beverages and related goods.

+AMMEX is premier supplier of high quality disposable gloves, +AMMEX was formed in 1988 to serve the growing need for infection control products. +AMMEX serves thousands of customers in a variety of industries. From healthcare to industrial applications, consistency in quality is important at +AMMEX.

Bound Tree Medical offers a complete line of emergency medical products from hundreds of innovative manufacturers. Public safety professionals now have access to the safest, most reliable and cutting-edge products on the market today from a single source.

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PRODUCT HIGHLIGHT
Supply Base Manager

Late vendor deliveries can create havoc with a company's ability to meet its service level goals. This often leads to a common practice of carrying additional inventory to offset poor vendor performance. Visibility to changing requirements and consistent, ongoing evaluation of a vendor's delivery performance will increase assurance of supply and reduced inventory expenses.

Supply Base Manager (SBM) is a browser-based application for collaborating with and monitoring vendor performance. A synchronized view of supply and demand is presented to the distributor and its suppliers and/or customers over the web. Individual shipments can be tracked by multiple parties using unique, secure logins for access to in-transit updates. Vendor performance history can be viewed and output by: detailed receipts, chart (Pareto) or in summary. Furthermore, supply assurance can be increased by incorporating "Safety Time" into lead-times or factoring the delivery variance into safety stock.

For more information about Supply Base Manager or for a demonstration, contact Jeffrey Porter, director of marketing and sales; toll free at 877.277.0868, x105 or JPorter@rockysoft.com.

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MARK YOUR CALENDARS
June 14, 2005 - RockySoft and RSM McGladrey, Harrisburg Pennsylvania
We will present a detailed seminar that will delve into an array of distribution management tools. We will combine our best practices with the proper tools in a "hands on" training that will send you back to work with the understanding to improve your bottom line. If you are interested in attending the seminar, please call 800-284-6308 or e-mail Microsoft@rsmi.com, to save your spot!

June 15, 2005 - RockySoft and RSM McGladrey, Iselin New Jersey
We will present a detailed seminar that will delve into an array of distribution management tools. We will combine our best practices with the proper tools in a "hands on" training that will send you back to work with the understanding to improve your bottom line. Please call 800-284-6308 or e-mail Microsoft@rsmi.com, to save your spot.

July 8-10, 2005 - Microsoft Worldwide Partner Conference Minneapolis, Minnesota
Welcome to the Microsoft Worldwide Partner Conference 2005, a global community of Microsoft partners focused on achieving the next level of business success. This worldwide meeting of the minds puts you in a unique position to investigate the important issues facing your business today. By coming together to create an intelligent network of shared ideas, Microsoft partners will be better positioned to take advantage of the rapid changes in the global economy. More Information: http://www.MicrosoftWWPartnerConference.com

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