Inventory mangement and Sporadic Sales

A lot of firms stocked big amounts of unique products in each of several warehouses. Their buyers seemed overwhelmed with the task of maintaining an adequate inventory of each of these items, most of which were not sold on a regular basis. At each company we worked to "tame the replenishment beast".
The replenishment of these popular products should be micro-managed to maximize inventory turnover (i.e., the number of opportunities to earn a profit) while retaining a high level of customer service. Indeed most books and articles on inventory management (including ours) focus on maximizing the profitability of these items that customers request most often. Most if not all of the methods described in these publications involve a prediction of future demand based, at least in part, on a calculated average of past usage. Although the specific calculation may differ from method to method, most rely on the average or weighted average of the quantity sold or used over a specific period of time.
We could apply other forecast demand formulas, but the results will probably be the same. The demand forecast will be less than the normal sales quantity of 10 pieces, and as a result there will not be enough inventory on-hand to meet the customer's needs.An item experiences sporadic sales if its normal sales quantity is greater than the average quantity sold or used per month.
The average sale quantity often reflects the normal sale quantity. However its accuracy may be influenced by one or two unusual sales. A more accurate method of determining the normal sales quantity is to search transaction history for the mode in the transaction history of the product – that is, the quantity that is most often sold or used.
Although items with sporadic sales or usage do not (or should not) usually represent a large portion of your total inventory investment, stocking these items correctly is crucial to providing a high level of customer service. It does not make sense to stock these products unless you maintain the most commonly requested quantity in your warehouse.