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Opinion Supply Chain
which in turn is loosely based on Pareto’s a huge inventory picture
80-20 rule. ABC Analysis is used to classify and ensuring accurate
inventory into A, B and C class items. Once inventory information.
classified, inventory management of these A key aspect here is the
items would be governed based on the class inventory classification
it belongs to, with Class ‘A’ items getting most itself. For this we
of the attention and Class ‘C’ items the least. recommend using the
Applying this principle to the above order analytics system –
processing flow, we would recommend that typically used for parsing
only a select group of critical items classified through web-traffic data
as class ‘A’ undergo the entire order promising at the front end – as the
process; including multiple inventory checks. primary input. Periodic
The rest of the item requests can then be depending on past experience. Additionally, updates to the classification based on the
promised via a shorter processing cycle certain exclusive designs where inventory is trends from the analytics engine can be
without the need to have real-time refresh. limited can also be categorised as Class A. uploaded to the back-end fulfilment solution
Also, common items such as socks and in real time.
The ABC Inventory Visibility classification headbands can be assumed to have infinite
system would thus group items according to availability. Each class of item calls for a Business case
parameters such as sale frequency, item value different strategy in terms of inventory visibility, For an implementation at a US-based online
or a similar relevant equivalent as per business which is carried out at an item line level. specialty retailer, Infosys integrated the
rules of the online retailer. For instance: customised web front-end with Sterling SCM
Class A Suite, which was the order management
Class A: High-value goods/make-to-order For all Class A items, the front end (order system owning the inventory master record.
items with low demand such as furniture, entry application) would mandatorily check The ABC inventory classification strategy has
jewellery, custom-made consumer items and the back-end inventory visibility system been adopted with respect to determining
high-end electronic goods. None of these (order fulfilment solution) for each item before front-end inventory visibility. With a product
items can be substituted with an equivalent confirming an order inventory reservation range of over a million SKUs serviced through
and, hence, this class of inventory requires would also be carried out to ensure availability its e-commerce site, an inventory check for all
both inventory check and reservation. Items to the customer. the items would have led to severe deterioration
where demand history does not exist (eg. of site performance and availability. Factoring
new product introductions), or where demand Class B in this constraint, the following approach was
spurts occur due to promotional events, For Class B items, a near real-time inventory taken to provide inventory visibility.
would get classified in Class-A inventory list. availability snapshot would be made available
at the front end to enable immediate checks
Class B: Medium-value, medium-demand during the checkout process via scheduled
Gopikrishnan G R:
items such as certain electronic equipment, refreshes from the back-end system. If the
head of supply chain
management practice,
cameras and apparel. Typically, these cannot available value at the front end for a particular
Infosys Technologies.
be substituted as the customers would be item is lower than a set threshold, then a
brand-sensitive in their choices. Inventory real-time system call is made to the inventory
check needs to be done but reservation may master for checking availability. These
be optional. thresholds can be sub-category or item-
Madhav.K. Vasantham:
specific. Reservation would be optional.
consultant, supply chain
Class C: Low-value items with stable a demand
management practice,
Infosys Technologies.
pattern, such as milk. This category lends Class C
itself to substitution as it is not particularly Class C items can be easily substituted;
brand sensitive. Inventory can be assumed hence the inventory picture need not be
to be infinite and, hence, does not need to maintained either at the front end or at the
be tightly controlled. inventory visibility system; thus deeming these
consultant, supply chain
items to be always available. Whenever
management practice,
An online apparel retailer may not have the service of an item is stopped, the catalogue Infosys Technologies.
demand pattern for the current season’s range master is updated directly. By foregoing
and would consequently find it difficult to inventory capture, a substantial reduction is
predict the demand. However, demand for achieved in the inventory synchronisation load Inventory visibility strategy
older designs would be stable as well as at the front end, given the fact Class C items We deployed Sterling’s activity-based real-
predictable, and so sufficient inventory can be typically form the majority of items sold. time availability monitor, which updates the
maintained. Therefore, business can choose inventory picture at the front end at regular
to classify standard designs as Class C This classification system helps in building the intervals based on the changes to supply and
items and the new designs as Class A or B, balance between maintaining and synchronising demand picture for each item. Different >>
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