So Predictable. Yet, So Unexpected!
See how much profits you are losing with your current approach! Now with 4R you will know—in advance—the increased profitability from 4R’s predictive analytics solutions and how you can maximize your investment.
Profit Optimized Omni Retail Replenishment Explained
Inventory Productivity Analysis is a one-time service to assess your profit opportunity. It does this by setting inventory for each SKU in each retail store that minimizes the sum of two costs:
- Lost margin due to under-stocking
- Cost of keeping inventory in the store
How We Capture More Profit
It’s quite scientific, but we use a proven process to identify areas where you are missing profit opportunities. We evaluate historical demand for each SKU, calculating sales vs. lost sales.
Inventory Productivity Analysis considers sales from both in-stock and out-of-stock stores to estimate demand rate and consequently, lost sales.
These are weighed by the stock-out rate. The analysis uses sales from in-stock stores. This prevents a downward bias in lost sales especially for very slow moving items.
Our scientific algorithm was developed by 4R’s founders, supply chain experts and authors Dr. Marshall Fisher of Wharton Business School and Dr. Ananth Raman of Harvard Business School. Their groundbreaking research on product lifecycles with over 30 world-class retailers pioneered retail supply chain analytics.
Did You Know Our Science Could Do This?
Inventory Productivity Analysis can forecast future demand for a specified period. It then generates a profit-maximizing reorderpoint for each SKU in the omni retail supply chain.
It compares actual average lost margin dollars and inventory carrying costs to calculate profit increase.
This highly detailed analysis helps capture profit you were not previously generating. It considers the demand forecast, the measure of demand variability, lead time, sales review period, retail price, wholesale cost, case size, and more.
Your ordering process becomes simplified. The Inventory Productivity Analysis runs a simulation using historical demand and calculated reorderpoints to drive your ordering process.
4R’s Inventory Productivity Analysis maximizes your profit, making second-guessing and reactionary decisions a thing of the past.
Shocking? Yes. Attainable? Yes again.
Our Inventory Productivity analysis reveals a close estimate of your profit increase. We’re conservative types, so we never over-promise.
Results
- Profit improvement between 1% to 3% of sales.
- Significant stockout reduction leading to more margin recaptured or less lost margin.
- Ability to target improvement level before testing as shown in the chart above.
IPA Benefit Summary
- With no change in aggregate inventory, estimated profit improvement is 2.55% of sales. This is a result of significant reduction in lost margin.
- Our retail client with $430M annual replenishment sales translated into an increase of in $11M in profits.
Maximizing Your ROI
We measure the difference between total cost incurred under current business practices vs. cost of using a profit optimizing methodology.
In every instance, Inventory Productivity Analysis has revealed areas where a retailer can capture additional profit. You can be sure our proven algorithm will find and fix areas where you can gain significant profit in your omni retail supply chain.
Partnering with 4R
Join us for a discovery session, involving 4R’s Client Services team members and your key business, IT and supply chain team. You’ll enjoy a team committed to a true partnership—we only profit when you profit.
