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Identifying and Labeling Inventory at the Product Level

Posted on August 21, 2008 by Jeff

A recent supplier addition provided a strong reminder that the definition of A, B, and C products aren’t always the same from one shipper to the next.

Driving Sales and Meeting Expectations

Generally, and this is what got us in trouble in the first place, manufacturer’s class each unique model number based on some understanding of performance, and the market’s demand for that particular model number. The manufacturer experiences this demand as turns, or total number of units sold in a given period of time.

When adding new product lines, it’s important to clearly communicate reasonable delivery expectations to a potential customer. These expectations can be communicated in a number of ways; in stock, out of stock, quantity on hand, or with lead times to name a few. Customers are then free to make their buying decisions based on their specific project deadlines.

It can be difficult to balance driving sales with communicating availability, especially if the product has an unfavorable lead time.  Don’t shy away from this kind of proactive communication solely for the purpose of increasing sales. Communicated or not, note that every customer has some set expectation for what they consider a reasonable delivery time. Right or wrong if you’re unable to meet this expectation the sale will likely result in a cancellation and likely the subsequent incurred transaction fees. Nothing is gained but a poor customer experience. Framing a customer’s expectation of a reasonable delivery time with availability information serves to curb a potentially out of control cancellation rate.

The A's, B's and C's of Product Classification

As part of a recent supplier addition, we built our availability logic around the suppliers communicated A, B, and C classifications. At the heart of our logic was this understanding that an “A” product should experience greater turns and therefore be stocked accordingly; subsequently “B’s” then “C’s”. In less than four weeks a high cancellation rate was raising its head. In an attempt to positively impact our cancellation rate, a meeting was calendared to sit down with our supplier’s purchasing department. It was quickly pinpointed that a far more complicated definition of A, B, and C was at play. Things such as anticipated turns and current marketing efforts were skewing the historical data from which their classifications were determined. Stocking hadn’t necessarily caught up to these classification efforts.

It was apparent that a more real-time solution needed to be established for determining unallocated on hand as well as next anticipated unallocated delivery dates. Building availability logic around this data should prove accurate, translating into a more positive customer experience with a decreased cancellation rate.

A Couple Key Take Aways 

  • Consider communicating availability clearly pre-transaction for a better customer experience. 
  • When establishing a new supplier relationship, make sure you’re aware of the internal philosophies that establish classifications from which you’ll build your logic. 
  • Attempt to peal back a layer from classifications by seeking real time unallocated availability. 
  • Always keep an eye on reporting such as cancellation rates. Look for nuances that will help you bring efficiencies to your processes before a potential issue is out of control.

 

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