Authorized Stock List Maintenance Program

Charles J. Bodenstab

In order to have any inventory management program operate effectively it is critical to have a logical system of establishing what items will be routinely stocked, and what items will be non-stocked. (See Chapter 2 in “A New Era In Inventory Management”.)

While a system as strong as the MARS program can determine the optimum quantity of inventory to order, it should not be the system to determine which items are to be stocked and which shouldn't. Although a computer program can give guidance and recommend candidates for stocking or non-stocking, a human with marketing knowledge has to be the final arbitrator in this decision process. The key point is that the process of determine the status of items has to be an overt process, not something that is backed into randomly.

The following is an outline of a computer program that can be easily created on any host computer to give the user recommendations in this area. This program would be run once per quarter, or even more frequently, depending on the nature of the business.

The program is in two parts. The first section will scan non-stocked items to see which should possibly be included in the stocked list, and the second scans the stocked items to find candidates for deletion from the stocked list.

Candidates for Stocking

• Have the system scan the past twelve months of demand for all the non-stocked items looking for any items that have had more than “X” demands in “Y” months (e.g. more than 4 demands in the past 9 months.) These parameters are user controlled to meet the characteristics of the particular company.
• When an item is found that passes this criteria, have it appear on a screen as a candidate for stocking. Display the actual transactions, including; Item number, description, customer name, date, and quantity. (We can afford to print this full detail, since by definition we are isolating items where the demand has just started to materialize.)
• A person with marketing knowledge should then scan down the screen, looking at each of the items to determine if the company really does want to stock the item. For example, even though the item passed the criteria for inclusion, the demands may have been all from one customer who gave plenty of lead time and did not expect to receive the item immediately from inventory.
• If the person decided that the recommendations should be reversed, then they would note the screen accordingly. Then at the end of the process, by keying in the appropriate signal, the system would change all the items in the run, except the ones that were overruled, from non-stocked to stocked.

Candidates for Deletion From The Stocked List

• This would be the second phase of the program and would operate similar to the one above, except that the run would check all the stocked items looking for items that had less than “Z” demands in “M” months. e. g. less than 3 demands in the last 6 months.
• Again, display the full detail and have the user scan the list to check if the recommendation was acceptable. For example, an item may have had only two demands, but the customer was critical, purchased a large quantity of other items, and expected to have this item come out of inventory with no delay.
• Then, as before have the system automatically change the status of the items to non-stocked, if they recommendation was not overruled by the user.

Using MARS-IW to Approximate This Function

As I stated at the start of this paper, it is preferable to have the host computer perform the functions just described, since the detail transactions by individual customer order reside at this level. It may be a problem getting this program written at your location, however (although it is actually a relatively simple one).

In order to give you a program to work with immediately, two programs have been included in MARS-IW that approximate this ideal. These programs operate similarly to the routines discussed above, except that they look at an entire month of activity (which is all that is available to MARS) vs. Specific transactions (e.g., highlight all items where I have seen less than three months of activity in the past nine months, in contrast to three transactions).

This compromise may be less serious than it would first appear, since for slow moving items the month of activity is often just one transaction anyway. Unfortunately, you will not be able to identify the customer who ordered the product unless you use the host computer to make the inquiry.

A final argument for this simple program is that, particularly when you first address the issue of cleaning up the authorized stock list, the decisions are not very subtle (e.g., items to be deleted may well not have had any demand in nine months, and items to be added have been enjoying significant demand for some time).

The programs in question can be found in the very first screen that comes up in MARS and are listed as: Report - STOCK LIST ADDITIONS and Report - STOCK LIST DELETIONS. The system documentation describes the procedure to use the reports, which incidentally, is extremely simple.