The problem: too much of the wrong stock, not enough of the right.
Most distributors and manufacturers carry both problems at once. A fast-moving fitting is out at the branch that needs it while the shelf across town holds a year of supply. A slow-moving filter keeps getting reordered because its max was set when a customer still bought it.
Stockouts cost sales, expedite fees and customer trust. Excess costs cash, space and, eventually, a write-off. Both come from the same place: reorder points and min/max levels that were right once and have not been revisited since.
Where it shows up
- Buyers start the day exporting reports from the ERP into spreadsheets.
- Min/max levels reflect last year's demand, or the year before.
- Branches call each other to find stock instead of seeing it.
- Supplier lead times in the system don't match what suppliers deliver.
- Excess and obsolete stock surfaces at the year-end count, too late to act.
Why it's hard to keep up by hand.
The math is well known. Applying it to every item, at every location, every week is what breaks down.
Thousands of small decisions
Every item at every branch needs its own reorder point. Ten thousand SKUs across five locations is fifty thousand numbers to keep current.
Lumpy, shifting demand
Industrial demand comes in large, irregular orders. A single project or a lost customer can make last quarter's average meaningless.
Data in too many places
On-hand counts sit in the ERP, real lead times in supplier emails, and customer commitments in a salesperson's head.
How Faraday fixes it.
Faraday does the weekly recalculation for every item and location, then hands buyers a short list of decisions with the reason for each.
- Step 1
Connect to your ERP
A read-only connection to systems like Prophet 21 brings in the item master, locations, on-hand quantities, open purchase and sales orders, and sales history.
- Step 2
Recalculate every item
Demand, demand variability and real supplier lead times are measured per item and location. Safety stock, reorder points and min/max follow from them.
- Step 3
Recommend the next action
A ranked buyer plan: what to buy, what to move between branches before buying, which levels to change, and what to hold. Each line says why.
- Step 4
Approve and write back
A buyer approves, edits or rejects each line. Approved purchase orders, transfers and level changes are written back to the ERP, and every decision is recorded.
Buyer plan · Week of Oct 19
Example data · P21 · Read-only source
| Item | Branch | On hand | On order | 30-day demand | Recommendation | Why |
|---|---|---|---|---|---|---|
| HYD-2210-08 · Hydraulic fitting, 1/2 in | Houston | 42 | 0 | 180 | Buy 200 | Below reorder point of 150. Supplier has averaged 18 days, not the 10 on file. |
| BRG-6204-2RS · Ball bearing, sealed | Houston | 12 | 0 | 95 | Transfer 120 from Dallas | Dallas holds 1,140, about a year of its demand. Moving stock avoids a new PO. |
| VLV-BV-075 · Ball valve, 3/4 in | Houston | 15 | 120 | 60 | Hold | Open PO 55310 arrives in 4 days and covers demand. |
| FLT-HF-3320 · Hydraulic filter | San Antonio | 610 | 0 | 4 | Lower max 600 → 60 | Demand fell after its main customer stopped ordering in March. |
What changes for your team.
| Workflow | Today | With Faraday |
|---|---|---|
| Reorder points | Set once, revisited when something breaks. | Recalculated weekly from demand and real lead times. |
| A buyer's morning | Exporting reports and reconciling spreadsheets. | Reviewing a ranked list of recommended actions. |
| Branch imbalance | Found by phone after a stockout. | Transfers proposed before new stock is bought. |
| Excess stock | Discovered at the year-end count. | Flagged as it builds, with the reason demand changed. |
| Record of decisions | Scattered across inboxes. | Every recommendation and approval kept with its reason. |
How to measure the impact
Track stockout frequency, inventory turns, excess stock value and buyer review time together. Compare the same items and locations before and after a change so reduced stock does not hide a drop in service.
Common questions about inventory optimization.
What is inventory optimization?
Inventory optimization is deciding how much of each item to stock at each location so you meet a target service level at the lowest total cost. It balances the cost of running out against the cost of carrying stock, item by item.
What is the difference between inventory management and inventory optimization?
Inventory management is recording and moving stock: receiving, counting, picking and transferring. Inventory optimization decides what those levels should be. Your ERP handles the first; the second is usually done in spreadsheets, if at all.
How do you calculate safety stock and a reorder point?
A common method assumes independent daily demand and a fixed lead time: Safety stock = Z × σd × √L. Reorder point = (average daily demand × L) + safety stock. Z is the service-level factor (1.65 for 95%), σd is the standard deviation of daily demand, and L is lead time in days. An item selling 20 a day with a deviation of 6 and a 16-day lead time needs 1.65 × 6 × 4 ≈ 40 units of safety stock and a reorder point of 360. Variable lead times or intermittent demand require a different model.
How often should reorder points and min/max levels be updated?
At least monthly for fast movers and whenever a supplier's lead time or a large customer's buying changes. Most teams review them yearly because doing it by hand takes too long. Faraday recalculates them weekly.
What causes excess and obsolete inventory?
Usually levels that outlive the demand behind them: a lost customer, a superseded part, or a one-time project counted as recurring. Minimum order quantities and buying ahead of price increases add to it.
What data does Faraday need?
The item master, locations, on-hand quantities, open purchase and sales orders, receipts and at least a year of sales history. All of it comes from your ERP over a read-only connection to start.
Does Faraday place purchase orders on its own?
Not unless you choose to allow it. By default every purchase order, transfer and level change waits for a buyer's approval. You can later let routine lines within limits you set go through without review.
Does it work with Prophet 21?
Yes. Faraday reads item, location, order and history records from Prophet 21 and writes approved changes back. Ask us about other ERPs.
