IP^Max
Maximize Inventory Productivity & Profitability

For years, retailers have struggled with the problem of balancing supply and demand. For seasonal goods, if you allocate too much inventory to a store you risk stranding it there at the end of the season. For replenishment items, ordering too much increases your carrying costs and ties up store and warehouse shelf space that could be used more productively. In both cases, if you order too little, you lose money by not having the product when and where the customer wants it.

Getting to the Profit
Most replenishment and allocation systems try to help retailers perform this balancing act by maintaining a certain in-stock rate at each store and warehouse. But how do you know what the "right" in-stock rate is—for any given product, at any given moment, at any given location? In-stock rates are an important measure of customer service, however, so is the amount of revenue an item produces for a given inventory investment. In other words, you also care about profits.

Trying to maximize profitability by properly targeting an in-stock rate is like trying to drive a car without a speedometer—you can push down or ease off of the accelerator pedal, but you can only guess as to
how fast you are going. Retailers may find themselves periodically letting up on the "in-stock" pedal when they think they have too much inventory, then later pressing it down to flow more product when they think they are giving up too many sales; in the absence of a "profit meter", they are doomed to repeat this behavior over and over again.

IP^Max — Profit Optimizing Inventory Management Solution
4R’s IP^Max , a profit optimizing inventory management solution, finally gives retailers the "profit meter" they need to break the typical feast-and-famine cycle. 4R’s IP^Max solution identifies the most profitable inventory level for each product in each location, for each review period. Our "software as a service" delivery model allows retailers to pump IP^Max’s profit optimized stocking level into an existing system, and quickly improve profitability without costly system changes. It leverages our staff of analytical experts to optimize how you do business—providing a customized, insightful approach to your inventory needs. We pride ourselves in aligning our profit optimization technology to your unique business model, generating greater value from your existing practices and infrastructure.

The Process On a weekly or daily basis, a retailer sends POS data and other supply chain parameters to 4R. 4R updates forecasts and optimization analyses to determine the most profitable inventory level for each store/SKU combination in the chain. 4R returns that data to you which is then plugged into your existing systems to complete the replenishment or allocation process. The data you receive depends on which service modules you are using. IPMax has three Service Modules:

Store Replenishment Distribution Center (DC) Replenishment Store Allocation for Seasonal Product

• Store Replenishment
  The Store Replenishment service produces, for each SKU at each retail store, a reorder point (or an "order up to" or "model stock" level). The algorithm used takes into account the forecast of demand, volatility of past sales, retail price, wholesale cost, inventory carrying cost, case pack size, order lead time, review period, and other supply chain parameters, to produce a reorder point that maximizes the profitability of that item at that store.
  
  
• DC Replenishment
  Similar to Store Replenishment, DC Replenishment produces, for each SKU at each DC, a reorder point. The process takes advantage of store-level reorder points and store inventory positions to forecast future store orders, and combines that with forecasts of demand from other sources, such as the Internet. This DC demand forecast is then used to set a vendor reorder point, taking into account vendor lead time, review period, minimum order quantities, and other supply chain parameters.
  
  
• Seasonal Allocation
  The Seasonal Allocation service module is intended for products with a limited selling season, and for which the total buy is made before the season starts. It produces, for each SKU, a prioritized case pack allocation sequence that places additional units of inventory in stores based on the likelihood and profitability of selling them. The algorithm is designed to maximize sales while minimizing the cost of stranded inventory at the end of the season.

The nature of the “profit meter” differs for replenishment and seasonal products:

For replenishment items, IPMax seeks to minimize the sum of two costs: lost margin dollars incurred when a stock out occurs at a store, and inventory carrying costs associated with the units held at each location. For seasonal goods, IPMax finds the amount to allocate to each store that balances the cost of a lost sale against the risk of stranding inventory at the end of the season. This automatically distributes the available units in such a way as to maximize the sales of the available inventory over the course of the season.

IPMax Delivers Significant Benefits:
	Better ROI on your Inventory Investment
	State-of-the-art profit optimization for your inventory Fit to your unique business attributes, culture and needs
	Leverages Existing Systems
	Lowers implementation risk Quick path to business impact Little or no retraining
	Cost Effective/Low Upfront Capital Expense
	No risk of costly tech bombs (delays, cost overruns, failures) Costs aligned with benefits

IP^Max performs a profit-and-loss analysis on every item at every location every time you review your inventory. Major retailers have seen profit improvements of 2% or more of sales.