Finding the optimum level of inventory stock is no easy feat. As a business owner, you should look to inventory analysis as a guide. There are a variety of analytics you can run to better understand your inventory stock. The type of analysis will differ depending on what information you want to gather and what stages of inventory management are proving difficult.
A very common way to look at inventory stock is through FSN analysis. Let’s take a closer look to consider what it’s all about. With a better understanding of your inventory stock and how it moves, you’ll be able to manage it more effectively and efficiently throughout the business.
What is FSN analysis?
FSN stands for fast-moving, slow-moving and non-moving items. Essentially, this segments inventory into three classifications. It looks at quantity, consumption rate and how often the item is issued and used.
Fast-moving items are items in your inventory stock that are issued or used frequently. When it comes to slow-moving items, these ones are issued or used for a specific period of time. Lastly, non-moving items are not issued or used at all over a certain time frame.
Why should I be using FSN analysis?
If you want to know which items are moving quickly and which items are dead stock, then an FSN analysis can help you categorise your inventory stock. The classification helps derive a pattern of issues from stores. It will help shape decisions around what items are becoming redundant and sitting there, costing you money.
A real-world application
Items are normally assessed and looked at over 12 month periods. Let’s say you want to know how the surfboards are doing in your inventory. To conduct an FSN analysis on the surfboards, you need to have a look at the date of receipt or the last date of issue. This date will let you see how many months have gone by since the last surfboard transaction.
The pluses and minuses of FSN analysis
FSN analysis can be beneficial for showing which items are active in your inventory. The active, fast-moving goods need to be reviewed regularly. This helps you make smarter buying decisions from suppliers and keep inventory relevant to demand. It can also show you which items are no longer necessary to keep in stock. The non-moving items are surplus to requirements and could be taking up precious real estate in the warehouse.
Therefore, you should use the information from the FSN analysis to shape which goods should have priority in the warehouse and which items should go. You can hold clearance sales or donate items. It’s important to get them off your books so they don’t continue to cost you money.
However, like any analysis, it can be skewed or inaccurate depending on certain fluctuations in demand. Maybe one year there was a very popular fast-moving item, but then it turned into a non-moving item. If you know this item is no longer desired, but your analysis suggests it’s still popular, then make sure you take this into account.
Topics: inventory accounting, inventory classification