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FSN Analysis

FSN Analysis

NishanthMay 4, 2023

Fast-Moving, Slow-Moving and Non-Moving Inventory Analysis Report (FSN technique)

FSN Analysis is an important aspect in inventory & logistics management technique. Todays, market and industrial businesses are under tremendous strain as consumer needs and trends vary even before they can be expected. Inventory and warehouse managers must react proactively when this trend varies; in fact, they have to impress customers.

The main aim of the inventory management is to increase the profits and performance of the supply chain, accurately estimating demand of the products, maintaining & lowering the inventory carrying costs & quality management. A consistent cash flow is necessary for a company to succeed in the retail sector. This can be only managed by a constant flow of inventories. Every retailer must carefully monitor and manage their stock movements because it has a significant impact on the development or failure of their retail operation. Additionally, they had to confirm that the products within are ones that would generate income. For this, FSN technology aids the industrial sector in solving the problem.

FSN Analysis: What Is Its Basis?

In FSN Analysis, the items are classified according to their rate of consumption. The items are divided into three verticals: 

    F – means Fast moving
    S – means Slow moving
    N – means Non-moving

The technique classifies the products in inventories to this vertical. Fast-moving stock is merchandise that sells quickly and does not require long-term inventory storage. On the other side, slow-moving stock is that which has a very low sales rate and just remains closed up in the inventory.

The fast-moving items are not store or take space for long time in inventory, these items move quickly with high rate of turnover and are bought and sold quickly. Fast moving goods usually have a low profit margin. They are non-durable and sell at relatively low cost. 
Slow moving items are the materials which are consumed less or not at all over a long period of time. In the case of Slow-moving inventory analysis, identification of your slow-moving items is the first step in this process. A lack of activity, a decline in activity, or an inventory turnover that is lower than the desired inventory turns listed on the item location record are all examples of slow moving. The difference between the total stock value and the total consumption value is the slow moving stock. Because you can identify which stocks are unnecessary and, if necessary, remove them, identifying slow moving stocks and no moving stocks will be very helpful in lowering inventory carrying costs.

The term "fast-moving inventory" refers to merchandise that moves quickly and requires frequent replenishment. The stock that falls under this group often has an inventory turnover ratio of greater than 3 and makes up between 10% and 15% of the entire inventory. 
Inventory that moves slowly through the supply chain has an inventory turnover ratio between 1 and 3. Typically, it makes up 30–35% of the entire supply.

The term "non-moving inventory" refers to inventory that rarely moves, has an inventory turnover ratio below 1, and accounts for 60–65% of the total stock.

How to Figure out FSN Products?

Generally, to figure out which product falls under which category you need to calculate the parameters like the rate of consumption, average time of stay, the yearly demand percentage, the frequency of reorders, and how frequently the products are utilised or relocated from their position.

Average time of stay = cumulative no. of inventory holding days ÷ (total qty of items received + opening balance)

Consumption rate = Total issued qty ÷ Total period duration

Following this computation, the cumulative average time of stay and cumulative consumption rate must be determined, and the percentages of both must then be determined.

Cumulative avg time of stay = avg: time stay of item + average stays of all items that stay longer in inventory than itself

Cumulative consumption rate = consumption rate of item + consumption rate of all items consumed faster than itself

Percentage avg time of stay = (cumulative average stay of item ÷ cumulative average stay of all items) x 100

Percentage consumption rate = (cumulative consumption rate of item ÷ cumulative consumption rate of all items) x 100

According to cumilative avg: time of stay,

    10% or less of the average cumulative stay is Fast moving products
    20% of the average cumulative stay is for slow-moving products
    On average, non-moving products for 70% of the avg: cumilative stay

According to cumilative consumption rate,

    70% of the average consumption rate is fast-moving inventory
    20% of the average consumption rate is slow-moving inventory
    Non-moving inventory is 10% or less of the average consumption rate

Generally, FSN Products are figure out based on above mentioned formulas.

Example for Fast- & Slow-moving products

Fast-moving products are nondurable products that sell quickly at relatively low cost. Mostly, FMCG’s like Groceries, milks, Fruits & vegetables, In case of Slow-moving products example, if you ship zero items of a particular stock keeping unit over a certain period of time, such as 90 or 120 days, then it is considered slow moving. The ratio of shipped items to days may vary. For instance, it may be that 10 items or less shipped over a 60-day period defines slow moving inventory.

We have developed Fast, Slow and Non-Moving Products Reports based on this turnover ratio calculations following the principles of FSN techniques. This Report is more useful in FMCGs and Retail based business.

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