The Cost of Spreadsheet Planning

Companies that depend on spreadsheets for demand planning, forecasting, and inventory management are often constrained by the spreadsheet’s inherent limitations. This post examines the drawbacks of traditional inventory management approaches caused by spreadsheets and their associated costs, contrasting these with the significant benefits gained from embracing state-of-the-art planning technologies.

Spreadsheets, while flexible for their infinite customizability, are fundamentally manual in nature requiring significant data management, human input, and oversight. This increases the risk of errors, from simple data entry mistakes to complex formula errors, that cause cascading effects that adversely impact forecasts.  Additionally, despite advances in collaborative features that enable multiple users to interact with a common sheet, spreadsheet-based processes are often siloed. The holder of the spreadsheet holds the data.  When this happens, many sources of data truth begin to emerge.  Without the trust of an agreed-upon, pristine, and automatically updated source of data, organizations don’t have the necessary foundation from which predictive modeling, forecasting, and analytics can be built.

In contrast, advanced planning systems like Smart IP&O are designed to overcome these limitations. Such systems are built to automatically ingest data via API or files from ERP and EAM systems, transform that data using built in ETL tools, and can process large volumes of data efficiently.  This enables businesses to manage complex inventory and forecasting tasks with greater accuracy and less manual effort because the data collection, aggregation, and transformation is already done. Transitioning to advanced planning systems is key for optimizing resources for several reasons.

Spreadsheets also have a scaling problem. The bigger the business grows, the greater the number of spreadsheets, workbooks, and formulas becomes.  The result is a tightly wound and rigid set of interdependencies that become unwieldy and inefficient.  Users will struggle to handle the increased load and complexity with slow processing times and an inability to manage large datasets and face challenges collaborating across teams and departments.

On the other hand, advanced planning systems for inventory optimization, demand planning, and inventory management are scalable, designed to grow with the business and adapt to its changing needs. This scalability ensures that companies can continue to manage their inventory and forecasting effectively, regardless of the size or complexity of their operations. By transitioning to systems like Smart IP&O, companies can not only improve the accuracy of their inventory management and forecasting but also gain a competitive edge in the market by being more responsive to changes in demand and more efficient in their operations.

Benefits of Jumping in: An electric utility company struggled to maintain service parts availability without overstocking for over 250,000-part numbers across a diverse network of power generation and distribution facilities. It replaced their twenty-year-old legacy planning process that made heavy use of spreadsheets with Smart IP&O and a real-time integration to their EAM system.  Before Smart, they were only able to modify Min/Max and Safety Stock levels infrequently.  When they did, it was nearly always because a problem occurred that triggered the review.  The methods used to change the stocking parameters relied heavily on gut feel and averages of the historical usage.   The Utility leveraged Smart’s what-if scenarios to create digital twins of alternate stocking policies and simulated how each scenario would perform across key performance indicators such as inventory value, service levels, fill rates, and shortage costs.  The software pinpointed targeted Min/Max increases and decreases that were deployed to their EAM system, driving optimal replenishments of their spare parts.  The result:  A significant inventory reduction of $9 million that freed up cash and valuable warehouse space while sustaining 99%+ target service levels.

Managing Forecast Accuracy: Forecast error is an inevitable part of inventory management, but most businesses don’t track it.  As Peter Drucker said, “You can’t improve what you don’t measure.”  A global high-tech manufacturing company utilizing a spreadsheet-based forecast process had to manually create its baseline forecasts and forecast accuracy reporting.  Given the planners’ workload and siloed processes, they just didn’t update their reports very often, and when they did, the results had to be manually distributed.  The business didn’t have a way of knowing just how accurate a given forecast was and couldn’t cite their actual errors by group of part with any confidence.  They also didn’t know whether their forecasts were outperforming a control method.  After Smart IP&O went live, the Demand Planning module automated this for them. Smart Demand Planner now automatically reforecasts their demand each planning cycle utilizing ML methods and saves accuracy reports for every part x location.  Any overrides that are applied to the forecasts can now be auto-compared to the baseline to measure forecast value add – i.e., whether the additional effort to make those changes improved the accuracy.  Now that the ability to automate the baseline statistical forecasting and produce accuracy reports is in place, this business has solid footing from which to improve their forecast process and resulting forecast accuracy.

Get it Right and Keep it Right:  Another customer in the aftermarket parts business has used Smart’s forecasting solutions since 2005 – nearly 20 years!  They were faced with challenges forecasting intermittently demanded parts sold to support their auto aftermarket business. By replacing their spreadsheet-based approach and manual uploads to SAP with statistical forecasts of demand and safety stock from SmartForecasts, they were able to significantly reduce backorders and lost sales, with fill rates improving from 93% to 96% within just three months.  The key to their success was leveraging Smart’s patented method for forecasting intermittent demand – The “Smart-Willemain” bootstrap method generated accurate estimates of the cumulative demand over the lead time that helped ensure better visibility of the possible demands.

Connecting Forecasts to the Inventory Plan: Advanced planning systems support forecast-based inventory management, which is a proactive approach that relies on demand forecasts and simulations to predict possible outcomes and their associated probabilities.  This data is used to determine optimal inventory levels.  Scenario-based or probabilistic forecasting contrasts with the more reactive nature of spreadsheet-based methods. A longtime customer in the fabric business, previously dealt with overstocks and stockouts due to intermittent demand for thousands of SKUs. They had no way of knowing what their stock-out risks were and so couldn’t proactively modify policies to mitigate risk other than making very rough-cut assumptions that tended to overstock grossly.  They adopted Smart Software’s demand and inventory planning software to generate simulations of demand that identified optimal Minimum On-Hand values and order quantities, maintaining product availability for immediate shipping, highlighting the advantages of a forecast-based inventory management approach.

Better Collaboration:  Sharing forecasts with key suppliers helps to ensure supply.  Kratos Space, part of Kratos Defense & Security Solutions, Inc., leveraged Smart forecasts to provide their Contract Manufacturers with better insights on future demand.  They used the forecasts to make commitments on future buys that enabled the CM to reduce material costs and lead times for engineered-to-order systems. This collaboration demonstrates how advanced forecasting techniques can lead to significant supply chain collaboration that yields efficiencies and cost savings for both parties.

 

Smart Software to Present at Epicor Insights 2024

Smart Software will present Epicor Insights 2024 sessions on combining AI with planner knowledge to make inventory data-driven decisions.

Belmont, MA, May 2024 – Smart Software, Inc., provider of industry-leading demand forecasting, planning, and inventory optimization solutions, today announced that it will present at Epicor Insights 2024 in Nashville, Tennessee.

Smart Software will be leading two sessions focused on combining demand forecasting and inventory planning AI with planner knowledge. These sessions are designed to empower Epicor Kinetic and Epicor Prophet 21 users to generate accurate forecasts and shape stocking policies that align with their business objectives.

Smart will also conduct two in-depth training lab sessions showcasing Smart Demand Planner and Smart Inventory Optimization, both integral parts of the Epicor Smart IP&O platform. Participants will gain expertise in precision forecasting and inventory management, learning to identify hidden risks in stocking policies, simulate various service strategy outcomes, and enhance forecast accuracy through comprehensive, multi-tiered analysis and scenario testing

Epicor Insight’s attendees may participate in any of the following sessions or Labs and are welcome to visit us at the Smart Software booth for a one-on-one consultation.

 

The Prophet 21 presentation is scheduled for Tuesday, May 21st, at 3:00 pm (CDT)

1 HD WEB PROPHET21 2024 

The Demand Planning Lab is scheduled for Wednesday, May 22nd, at 3:20 pm (CDT).

2 HD WEB DEMANDPLANNING LAB 2024 copy

The Kinetic presentation is scheduled for Wednesday, May 22nd, at 4:20 pm (CDT)

3 HD WEB KINETIC 2024 copy

The Inventory Optimization Lab is scheduled for Thursday, May 23rd, at 3:15 pm (CDT)

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To learn more about Epicor Insights, visit here: https://www.epicor.com/en-us/customers/insights

 

About Smart Software, Inc.
Founded in 1981, Smart Software, Inc. is a leader in providing businesses with enterprise-wide demand forecasting, planning, and inventory optimization solutions.  Smart Software’s demand forecasting and inventory optimization solutions have helped thousands of users worldwide, including customers such as Disney, Arizona Public Service, and Ameren. Smart’s Inventory Planning & Optimization Platform, Smart IP&O, provides demand planners the tools to handle sales seasonality, promotions, new and aging products, multi-dimensional hierarchies, and intermittently demanded service parts and capital goods items. It also provides inventory managers with accurate estimates of the optimal inventory and safety stock required to meet


For more information, please contact Smart Software, Inc., Four Hill Road, Belmont, MA 02478.
Phone: 1-800-SMART-99 (800-762-7899); FAX: 1-617-489-2748; E-mail: info@smartcorp.com

 

 

Smart Software Announces Strategic Partnership with Sage for Inventory Optimization and Demand Forecasting

Belmont, MA, February  2024 –Smart Software, a global provider of next-generation cloud-based inventory optimization, demand planning, and forecasting solutions, announces today their strategic partnership with Sage.

This collaboration brings Smart IP&O (Inventory Planning and Optimization) into the latest cloud and on-premises versions of Sage X3, Sage 300, and Sage 100. By seamlessly integrating strategic planning with operational execution, users can eliminate reactive inventory planning and forecast guesswork by accurately calibrating risks, tradeoffs, and consequences at scale with Smart IP&O.

Sage is the leader in accounting, financial, HR and payroll technology for small and mid-sized businesses (SMBs). Customers trust Sage’s comprehensive suite of finance, HR, and Supply Chain software to streamline processes and simplify operational tasks. This integrated approach to solving business challenges ensures seamless interactions and delivers valuable insights to SMBs, reinforcing Sage’s position as a leader in the industry.

“Smart Software helps our customers by delivering insightful business analytics for inventory modeling and forecasting that drive ordering and replenishment in the latest version of Sage. With Smart IP&O, our customers gain a means to shape inventory strategy to align with the business objectives while empowering their planning teams to reduce inventory and improve service,” says   Regina Crowshaw, Director of ISV Strategy, Sales, and Programs at Sage.

“Sage drives innovation and fosters business growth by delivering insightful solutions designed to enable organizations to scale and succeed. By leveraging the capabilities of Smart’s field-proven demand forecasting and inventory planning solutions, Sage is poised to supply the necessary expertise to assess needs, establish objectives, and craft the underlying business strategies key for ensuring widespread adoption and deriving maximum benefit.  We look ahead to what we can accomplish together, and we look forward to our joint success”, says Greg Hartunian, President and CEO at Smart Software.

About Smart Software, Inc.

Founded in 1981, Smart Software, Inc. is a leader in providing businesses with enterprise-wide demand forecasting, planning, and inventory optimization solutions.  Smart Software’s demand forecasting and inventory optimization solutions have helped thousands of users worldwide, including customers such as Disney, Arizona Public Service, and Ameren. Smart’s Inventory Planning & Optimization Platform, Smart IP&O, provides demand planners the tools to handle sales seasonality, promotions, new and aging products, multi-dimensional hierarchies, and intermittently demanded service parts and capital goods items. It also provides inventory managers with accurate estimates of the optimal inventory and safety stock required to meet future orders and achieve desired service levels.  Smart Software is headquartered in Belmont, Massachusetts, and our website is www.smartcorp.com.

About Sage Corporation

Sage exists to knock down barriers so everyone can thrive, starting with the millions of Small and Mid-Sized Businesses served by us, our partners, and accountants. Customers trust our finance, HR, and payroll software to make work and money flow. By digitizing business processes and relationships with customers, suppliers, employees, banks, and governments, our digital network connects SMBs, removing friction and delivering insights. Knocking down barriers also means we use our time, technology, and experience to tackle digital inequality, economic inequality and the climate crisis.


For more information, please contact Smart Software, Inc., Four Hill Road, Belmont, MA 02478.
Phone: 1-800-SMART-99 (800-762-7899); FAX: 1-617-489-2748; E-mail: info@smartcorp.com

 

 

Smart Software has been honored with the Epicor ISV Marketing Excellence Award

Belmont, MA, October 2023 – Smart Software is pleased to announce that it is the recipient of the Epicor ISV Marketing Excellence Award, recognizing Smart’s outstanding performance and contributions in driving successful marketing initiatives, campaigns, and innovation.

Pete Reynolds, Smart Software’s Vice President of Channel Sales, will receive the Marketing Excellence Award during the ISV Partner Briefing at Ignite. The event will take place in Dallas on Monday, October 23, 2023, from 10:45 am – 12:30 pm at the Gaylord Texan Convention Center.

Greg Hartunian, Smart Software’s CEO stated, “This recognition is a testament to the collaboration between the Smart and Epicor teams. Together, we’ve raised a great deal of awareness about the benefits of better inventory planning and forecasting.  We look forward to helping more customers in the year to come and launching our partnership to new heights.”

Smart Software is an Epicor Platinum Partner, the highest designation in the ISV Partner Program.

 

About Smart Software, Inc.

Founded in 1981, Smart Software, Inc. is a leader in providing businesses with enterprise-wide demand forecasting, planning, and inventory optimization solutions.  Smart Software’s demand forecasting and inventory optimization solutions have helped thousands of users worldwide, including customers such as Disney, Arizona Public Service, Ameren, and The American Red Cross.  Smart’s Inventory Planning & Optimization Platform, Smart IP&O, provides demand planners the tools to handle sales seasonality, promotions, new and aging products, multi-dimensional hierarchies, and intermittently demanded service parts and capital goods items.  It also provides inventory managers with accurate estimates of the optimal inventory and safety stock required to meet future orders and achieve desired service levels.  Smart Software is headquartered in Belmont, Massachusetts, and our website is www.smartcorp.com.


For more information, please contact Smart Software, Inc., Four Hill Road, Belmont, MA 02478.
Phone: 1-800-SMART-99 (800-762-7899); FAX: 1-617-489-2748; E-mail: info@smartcorp.com

 

 

Centering Act: Spare Parts Timing, Pricing, and Reliability

Just as the renowned astronomer Copernicus transformed our understanding of astronomy by placing the sun at the center of our universe, today, we invite you to re-center your approach to inventory management. And while not quite as enlightening, this advice will help your company avoid being caught in the gravitational pull of inventory woes—constantly orbiting between stockouts, surplus gravity, and the unexpected cosmic expenses of expediting?

In this article, we’ll walk you through the process of crafting a spare parts inventory plan that prioritizes availability metrics such as service levels and fill rates while ensuring cost efficiency. We’ll focus on an approach to inventory planning called Service Level-Driven Inventory Optimization. Next, we’ll discuss how to determine what parts you should include in your inventory and those that might not be necessary. Lastly, we’ll explore ways to enhance your service-level-driven inventory plan consistently.

In service-oriented businesses, the consequences of stockouts are often very significant.  Achieving high service levels depends on having the right parts at the right time. However, having the right parts isn’t the only factor. Your Supply Chain Team must develop a consensus inventory plan for every part, then continuously update it to reflect real-time changes in demand, supply, and financial priorities.

 

Managing inventory with Service-level-driven planning combines the ability to plan thousands of items with high-level strategic modeling. This requires addressing core issues facing inventory executives:

  • Lack of control over supply and associated lead times.
  • Unpredictable intermittent demand.
  • Conflicting priorities between maintenance/mechanical teams and Materials Management.
  • Reactive “wait and see” approach to planning.
  • Misallocated inventory, causing stockouts and excess.
  • Lack of trust in systems and processes.

The key to optimal service parts management is to grasp the balance between providing excellent service and controlling costs. To do this, we must compare the costs of stockout with the cost of carrying additional spare parts inventory. The costs of a stockout will be higher for critical or emergency spares, when there is a service level agreement with external customers, for parts used in multiple assets, for parts with longer supplier lead times, and for parts with a single supplier. The cost of inventory may be assessed by considering the unit costs, interest rates, warehouse space that will be consumed, and potential for obsolescence (parts used on a soon-to-be-retired fleet have a higher obsolescence risk, for example).

To arbitrate how much stock should be put on the shelf for each part, it is critical to establish consensus on the desired key metrics that expose the tradeoffs the business must make to achieve the desired KPIs. These KPIs will include Service Levels that tell you how often you meet usage needs without falling short on stock, Fill Rates that tell you what percentage of demand is filled, and Ordering costs detail the expenses incurred when you place and receive replenishment orders. You also have Holding costs, which encompass expenses like obsolescence, taxes, and warehousing, and Shortage costs that pertain to expenses incurred when stockouts happen.

An MRO business or Aftermarket Parts Planning team might desire a 99% service level across all parts – i.e., the minimum stockout risk that they are willing to accept is 1%. But what if the amount of inventory needed to support that service level is too expensive? To make an informed decision on whether there is going to be a return on that additional inventory investment, you’ll need to know the stockout costs and compare that to the inventory costs. To get stockout costs, multiply two key elements: the cost per stockout and the projected number of stockouts. To get inventory value, multiply the units required by the unit cost of each part. Then determine the annual holding costs (typically 25-35% of the unit cost). Choose the option that yields a total lower cost. In other words, if the benefit associated with adding more stock (reduced shortage costs) outweighs the cost (higher inventory holding costs), then go for it. A thorough understanding of these metrics and the associated tradeoffs serves as the compass for decision-making.

Modern software aids in this process by allowing you to simulate a multitude of future scenarios. By doing so, you can assess how well your current inventory stocking strategies are likely to perform in the face of different demand and supply patterns. If anything falls short or goes awry, it’s time to recalibrate your approach, factoring in current data on usage history, supplier lead times, and costs to prevent both stockouts and overstock situations.

 

Enhance your service-level-driven inventory plan consistently.

In conclusion, it’s crucial to assess your service-level-driven plan continuously. By systematically constructing and refining performance scenarios, you can define key metrics and goals, benchmark expected performance, and automate the calculation of stocking policies for all items. This iterative process involves monitoring, revising, and repeating each planning cycle.

The depth of your analysis within these stocking policies relies on the data at your disposal and the configuration capabilities of your planning system. To achieve optimal outcomes, it’s imperative to maintain ongoing data analysis. This implies that a manual approach to data examination is typically insufficient for the needs of most organizations.

For information on how Smart Software can help you meet your service supply chain goals with service-driven planning and more, visit the following blogs.

–   “Explaining What  Service-Level Means in Your Inventory Optimization Software”  Stocking recommendations can be puzzling, especially when they clash with real-world needs.  In this post, we’ll break down what that 99% service level means and why it’s crucial for managing inventory effectively and keeping customers satisfied in today’s competitive landscape.

–  “Service-Level-Driven Planning for Service Parts Businesses” Service-Level-Driven Service Parts Planning is a four-step process that extends beyond simplified forecasting and rule-of-thumb safety stocks. It provides service parts planners with data-driven, risk-adjusted decision support.

–   “How to Choose a Target Service Level.” This is a strategic decision about inventory risk management, considering current service levels and fill rates, replenishment lead times, and trade-offs between capital, stocking and opportunity costs.  Learn approaches that can help.

–   “The Right Forecast Accuracy Metric for Inventory Planning.”  Just because you set a service level target doesn’t mean you’ll actually achieve it. If you are interested in optimizing stock levels, focus on the accuracy of the service level projection. Learn how.

 

Spare Parts Planning Software solutions

Smart IP&O’s service parts forecasting software uses a unique empirical probabilistic forecasting approach that is engineered for intermittent demand. For consumable spare parts, our patented and APICS award winning method rapidly generates tens of thousands of demand scenarios without relying on the assumptions about the nature of demand distributions implicit in traditional forecasting methods. The result is highly accurate estimates of safety stock, reorder points, and service levels, which leads to higher service levels and lower inventory costs. For repairable spare parts, Smart’s Repair and Return Module accurately simulates the processes of part breakdown and repair. It predicts downtime, service levels, and inventory costs associated with the current rotating spare parts pool. Planners will know how many spares to stock to achieve short- and long-term service level requirements and, in operational settings, whether to wait for repairs to be completed and returned to service or to purchase additional service spares from suppliers, avoiding unnecessary buying and equipment downtime.

Contact us to learn more how this functionality has helped our customers in the MRO, Field Service, Utility, Mining, and Public Transportation sectors to optimize their inventory. You can also download the Whitepaper here.

 

 

White Paper: What you Need to know about Forecasting and Planning Service Parts

 

This paper describes Smart Software’s patented methodology for forecasting demand, safety stocks, and reorder points on items such as service parts and components with intermittent demand, and provides several examples of customer success.