Should You Be Using SDE Analysis to Classify Your Inventory?

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When you’re a business owner, trying to run a successful warehouse can be a big job. Inventory levels can fluctuate with demand and keeping track of everything without the right inventory control can be a challenge. Look to implement a periodic inventory analysis to enhance your inventory control practices. It will give you a better understanding of what products are available and let you take a closer look at demand. Inventory analysis is a critical step that guides the decision-making process from business owners. Inventory analysis can streamline your product classification system, which will lead to smoother inventory control processes.

There are a variety of inventory analysis options to choose from if you’re looking to have a better understanding of your inventory practices. Each system serves a different purpose. One of the most common ways to look at inventory is through the SDE analysis. Let’s break down what this means and how it can benefit a business.

What is SDE analysis?

Starting with the basics, what does SDE stand for? It represents three levels of classification: Scarce, difficult and easy. The SDE analysis looks at what inventory is available and classifies it according to the scarcity of supply. With this analysis, scarce products are usually imported, take longer to arrive and the supply in harder to come by. An example of a scarce product is one that might have to go through government agencies. This slows down the process, whether it be in customs or through regulatory bodies. Either way, these channels can make a product scarce.

Next is the difficult classification. This refers to items that could be available domestically but they are still harder to get hold of in the market. The lead time to acquire these goods might be two weeks but is generally less than six months. Lastly, easily identifies inventory that is readily available and easy to access. These items are available locally and can be procured quickly.

Why should you use SDE analysis?

If you use the SDE classification, it can help you counteract any difficulties faced in the procurement process. By classifying items as scarce, difficult or easy, it can help you clearly plan your year with the procurement team. You can see which items you need to get in advance and which products can be sourced with ease.

Benefits of SDE analysis

One of the main benefits of conducting an SDE analysis is future planning. Since it highlights which products might be trickier to acquire than others, it can kick-start your procurement process. This allows a business owner to prepare the warehouse and organise plans with other suppliers when they can get this process underway. It is a simple system that can provide guidelines and a quick snapshot of what’s going on and what needs to be ordered.

Disadvantages of SDE analysis

Although using this type of analysis can help make a foggy inventory picture clearer, it isn’t always very accurate. It can help loosely with planning, but one difficult product might vary drastically from another difficult product. For instance, one could be acquired in three weeks, while another one could take fourth months to procure. However, they are both marked D for difficult. It can provide some overarching guidance, but this classification shouldn’t be used to plan exact dates in the calendar. Consulting with individual suppliers is necessary and each product needs to be managed on an individual basis.

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Melanie - Unleashed Software

Article by Melanie Chan in collaboration with our team of Unleashed Software inventory and business specialists. Melanie has been writing about inventory management for the past three years. When not writing about inventory management, you can find her eating her way through Auckland.

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