{"id":1101,"date":"2019-07-31T11:11:08","date_gmt":"2019-07-31T15:11:08","guid":{"rendered":"http:\/\/smartcorp.com\/serviceleveldrivenplanning-copy\/"},"modified":"2024-06-04T16:02:56","modified_gmt":"2024-06-04T20:02:56","slug":"causas-fundamentales","status":"publish","type":"page","link":"https:\/\/smartcorp.com\/es\/rootcauses\/","title":{"rendered":"Abordar las causas fundamentales del dolor de inventario"},"content":{"rendered":"

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Addressing the Root Causes of Inventory Pain<\/h1>\n

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Addressing the Root Causes of Inventory Pain<\/h1>\n

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The Solution: Service Level Driven Planning<\/h1>\n

[\/et_pb_text][\/et_pb_column][\/et_pb_row][et_pb_row column_structure=”1_2,1_2″ _builder_version=”4.16″ background_size=”initial” background_position=”top_left” background_repeat=”repeat” custom_margin=”-22px||-22px||false|false” global_colors_info=”{}”][et_pb_column type=”1_2″ _builder_version=”4.16″ custom_padding=”|||” global_colors_info=”{}” custom_padding__hover=”|||”][et_pb_image src=”https:\/\/smartcorp.com\/wp-content\/uploads\/2020\/08\/Service-level-Planning-Demand-Inventory-Forecasting-1024×459.jpg” alt=”Ipad with business data of improved Demand & Inventory Planning 2″ title_text=”Service level Planning Demand Inventory Forecasting” _builder_version=”4.16″ custom_margin=”||-1px||false|false” custom_padding=”||0px||false|false” global_colors_info=”{}”][\/et_pb_image][et_pb_text admin_label=”Smart IP&O” _builder_version=”4.23.1″ header_text_color=”#ffffff” header_3_text_color=”#000000″ header_3_line_height=”1.7em” background_color=”#ffffff” custom_padding=”13px|33px|18px|33px|false|false” z_index_tablet=”500″ text_text_shadow_horizontal_length_tablet=”0px” text_text_shadow_vertical_length_tablet=”0px” text_text_shadow_blur_strength_tablet=”1px” link_text_shadow_horizontal_length_tablet=”0px” link_text_shadow_vertical_length_tablet=”0px” link_text_shadow_blur_strength_tablet=”1px” ul_text_shadow_horizontal_length_tablet=”0px” ul_text_shadow_vertical_length_tablet=”0px” ul_text_shadow_blur_strength_tablet=”1px” ol_text_shadow_horizontal_length_tablet=”0px” ol_text_shadow_vertical_length_tablet=”0px” ol_text_shadow_blur_strength_tablet=”1px” quote_text_shadow_horizontal_length_tablet=”0px” quote_text_shadow_vertical_length_tablet=”0px” quote_text_shadow_blur_strength_tablet=”1px” header_text_shadow_horizontal_length_tablet=”0px” header_text_shadow_vertical_length_tablet=”0px” header_text_shadow_blur_strength_tablet=”1px” header_2_text_shadow_horizontal_length_tablet=”0px” header_2_text_shadow_vertical_length_tablet=”0px” header_2_text_shadow_blur_strength_tablet=”1px” header_3_text_shadow_horizontal_length_tablet=”0px” header_3_text_shadow_vertical_length_tablet=”0px” header_3_text_shadow_blur_strength_tablet=”1px” header_4_text_shadow_horizontal_length_tablet=”0px” header_4_text_shadow_vertical_length_tablet=”0px” header_4_text_shadow_blur_strength_tablet=”1px” header_5_text_shadow_horizontal_length_tablet=”0px” header_5_text_shadow_vertical_length_tablet=”0px” header_5_text_shadow_blur_strength_tablet=”1px” header_6_text_shadow_horizontal_length_tablet=”0px” header_6_text_shadow_vertical_length_tablet=”0px” header_6_text_shadow_blur_strength_tablet=”1px” box_shadow_horizontal_tablet=”0px” box_shadow_vertical_tablet=”0px” box_shadow_blur_tablet=”40px” box_shadow_spread_tablet=”0px” global_colors_info=”{}”]<\/p>\n

Service Level Driven Planning<\/h3>\n

[\/et_pb_text][\/et_pb_column][et_pb_column type=”1_2″ _builder_version=”4.16″ custom_padding=”|||” global_colors_info=”{}” custom_padding__hover=”|||”][et_pb_text admin_label=”Introducing Service Level Driven Planning” _builder_version=”4.23.1″ header_text_color=”#ffffff” header_3_text_color=”#000000″ header_3_line_height=”1.7em” background_color=”#ffffff” custom_margin=”16px||17px||false|false” custom_padding=”44px|33px|56px|33px|false|false” z_index_tablet=”500″ text_text_shadow_horizontal_length_tablet=”0px” text_text_shadow_vertical_length_tablet=”0px” text_text_shadow_blur_strength_tablet=”1px” link_text_shadow_horizontal_length_tablet=”0px” link_text_shadow_vertical_length_tablet=”0px” link_text_shadow_blur_strength_tablet=”1px” ul_text_shadow_horizontal_length_tablet=”0px” ul_text_shadow_vertical_length_tablet=”0px” ul_text_shadow_blur_strength_tablet=”1px” ol_text_shadow_horizontal_length_tablet=”0px” ol_text_shadow_vertical_length_tablet=”0px” ol_text_shadow_blur_strength_tablet=”1px” quote_text_shadow_horizontal_length_tablet=”0px” quote_text_shadow_vertical_length_tablet=”0px” quote_text_shadow_blur_strength_tablet=”1px” header_text_shadow_horizontal_length_tablet=”0px” header_text_shadow_vertical_length_tablet=”0px” header_text_shadow_blur_strength_tablet=”1px” header_2_text_shadow_horizontal_length_tablet=”0px” header_2_text_shadow_vertical_length_tablet=”0px” header_2_text_shadow_blur_strength_tablet=”1px” header_3_text_shadow_horizontal_length_tablet=”0px” header_3_text_shadow_vertical_length_tablet=”0px” header_3_text_shadow_blur_strength_tablet=”1px” header_4_text_shadow_horizontal_length_tablet=”0px” header_4_text_shadow_vertical_length_tablet=”0px” header_4_text_shadow_blur_strength_tablet=”1px” header_5_text_shadow_horizontal_length_tablet=”0px” header_5_text_shadow_vertical_length_tablet=”0px” header_5_text_shadow_blur_strength_tablet=”1px” header_6_text_shadow_horizontal_length_tablet=”0px” header_6_text_shadow_vertical_length_tablet=”0px” header_6_text_shadow_blur_strength_tablet=”1px” box_shadow_horizontal_tablet=”0px” box_shadow_vertical_tablet=”0px” box_shadow_blur_tablet=”40px” box_shadow_spread_tablet=”0px” global_colors_info=”{}”]<\/p>\n

Smart Software has developed a methodical approach to address these pain points. \u201cService Level Driven Planning\u201d (SLDP for short), powered by our inventory planning and optimization platform Smart IP&O. \u00a0Service Level Driven planning extends beyond traditional demand planning and forecasting by leveraging probability modeling and analytics to drive inventory strategy. \u00a0To learn more, read about the root causes below, our blog on\u00a0Service Level Driven Planning<\/a>, and check out\u00a0Smart IP&O’s product page.\u00a0<\/a><\/p>\n

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Challenges: Addressing the Root Causes of Inventory Pain<\/h1>\n

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Intermittent Demand” _builder_version=”4.23.1″ header_text_color=”#0c71c3″ body_line_height=”1.6em” background_color=”#edf2f7″ custom_margin=”|-1px|30px|-1px|false|false” custom_padding=”20px|24px|73px|24px|false|false” animation=”off” border_radii=”on|1px|1px|1px|1px” image_max_width=”72%” global_colors_info=”{}”]<\/p>\n

Intermittent Demand<\/h4>\n

Highly variable & intermittent demands make consistently accurate projections all but impossible. Countless hours are spent trying to anticipate what will come next rather than calibrating the organization\u2019s risk tolerance and harnessing that information to determine required levels of supply. \u00a0Intermittent demand \u2013 also known as lumpy, volatile, variable or unpredictable demand \u2013\u00a0have\u00a0many zero or low volume values interspersed with random spikes of demand that are often many times larger than the average. \u00a0Intermittent demand makes it difficult to accurately forecast demand and inventory requirements because there aren’t any inherent patterns. \u00a0And any patterns that may\u00a0exist are overwhelmed by the random spikes in demand. \u00a0Many companies make the mistake of “chasing the forecast” insisting that sales or technicians provide better estimates of demand or turn to unreliable forecasting techniques in a quest to predict the next spike. \u00a0Many resort to forecasting inventory requirements such as Min\/Max levels and Reorder Points relying primarily on subjective business knowledge and\u00a0simple \u201crule of thumb\u201d estimates.\u00a0 The result is that millions of dollars are wasted every year because of either excess inventory costs or poor customer service due to stock-outs<\/p>\n

[\/et_pb_blurb][et_pb_blurb url=”https:\/\/smartcorp.com\/smart-platform\/” image=”https:\/\/smartcorp.com\/wp-content\/uploads\/2020\/08\/AD-HOC.png” alt=”Cone Icon ” image_icon_width=”72%” admin_label=”Ad Hoc Process” _builder_version=”4.23.1″ header_level=”h6″ header_text_color=”#ffffff” header_line_height=”1.6em” body_line_height=”1.6em” background_color=”#edf2f7″ custom_margin=”|-1px|30px|-1px|false|false” custom_padding=”20px|24px|30px|24px|false|false” animation=”off” border_radii=”on|1px|1px|1px|1px” image_max_width=”72%” global_colors_info=”{}”]<\/p>\n

Ad Hoc Process<\/h4>\n

The failure to establish common metrics makes it difficult to adjudicate conflicting priorities. For example, Finance may prefer to conserve cash, while Sales and Maintenance insist that they never stock out. The result is often a test of wills with forecast and inventory planners caught in the middle. This often results in decision making based on a pain avoidance response. For example, order quantities will often go up immediately following a stockout to ensure the outage never recurs. This tends to be a one-way ratchet until inventory carrying costs become an obvious drain of much needed cash.\u00a0When inventory is out of balance, finger pointing often results. Operations is often stuck in the middle between sales and finance. Without a clear direction from the executive team on service goals, inventory budgets, and an insistence that sales and finance come to the table knowing that tradeoffs will have to be made, the planning team becomes disempowered and the cycle continues. An objective, quantifiable performance measure such as service level changes the discussion, putting a dollar valued on a negotiable level of service.<\/p>\n

[\/et_pb_blurb][\/et_pb_column][et_pb_column type=”1_2″ _builder_version=”4.16″ custom_padding=”|||” global_colors_info=”{}” custom_padding__hover=”|||”][et_pb_blurb url=”https:\/\/smartcorp.com\/smart-platform\/” image=”https:\/\/smartcorp.com\/wp-content\/uploads\/2020\/08\/THUMBS.png” alt=”Rule of Thumb ICON” image_icon_width=”72%” admin_label=”Rule of Thumb” _builder_version=”4.23.1″ header_level=”h6″ header_font=”Cabin||||||||” header_text_align=”left” header_text_color=”#ffffff” header_font_size=”14px” header_line_height=”1.6em” body_line_height=”1.6em” background_color=”#edf2f7″ custom_margin=”|-1px|30px|-1px|false|false” custom_padding=”20px|24px|30px|24px|false|false” animation=”off” border_radii=”on|1px|1px|1px|1px” image_max_width=”72%” global_colors_info=”{}”]<\/p>\n

Rule of Thumb<\/h4>\n

Safety stock levels, reorder points, lead times, and order quantity directly influence the service vs. cost relationship. Every day, the ERP system makes purchase order suggestions and manufacturing orders based on these drivers.\u00a0\u00a0Ensuring that these inputs are understood and optimized will generate better returns on inventory assets. \u00a0Organizations that are able to do so will see improvements in service and reductions in inventory costs. \u00a0Unfortunately, the\u00a0specific inventory policy being utilized is often unclear to many management teams. \u00a0In absence of a clearly defined and communicated policy, \u00a0planners are forced to develop their own unique approaches. \u00a0These self-developed approaches are most often a combination of\u00a0simple rules of thumb and institutional knowledge. Inventory executives are\u00a0simply\u00a0ill equipped to shape inventory according to the changing needs and priorities of the business. \u00a0Inventory costs balloon and service performance suffers when unable to answer questions such as: “What is my current reorder point and reorder quantity policy, what level of service and inventory cost will this policy yield in the future, and how will performance and costs be influenced by specific changes to the policy.” \u00a0Rule of thumb approaches don’t answer these questions. \u00a0In fact, they ignore the critical role of of demand and supply uncertainty. \u00a0This results in excess inventory for predictable items and more frequent stock outs on less predictable items.<\/p>\n

[\/et_pb_blurb][et_pb_blurb url=”https:\/\/smartcorp.com\/smart-platform\/” image=”https:\/\/smartcorp.com\/wp-content\/uploads\/2020\/08\/SKU-Proliferation.png” alt=”ICON SKU Proliferation” image_icon_width=”72%” admin_label=”SKU Proliferation” _builder_version=”4.23.1″ header_text_color=”#0c71c3″ body_line_height=”1.6em” background_color=”#edf2f7″ custom_margin=”|-1px|30px|-1px|false|false” custom_padding=”20px|24px|73px|24px|false|false” animation=”off” border_radii=”on|1px|1px|1px|1px” image_max_width=”72%” global_colors_info=”{}”]<\/p>\n

SKU Proliferation<\/h4>\n

Whether ordering a commonly demanded, inexpensive item of an expensive intermittently demanded item, today’s customers expect high customer service levels. \u00a0This means 100% of what is ordered must be shipped from stock or within a few days. \u00a0Quoting a delivery time of more than few days may result in a cancelled order and\/or violation of service level agreement costing thousands and jeopardizing customer relationships. To remain competitive, companies often must maintain a very large catalog of items all with potentially different demand patterns and volumes. \u00a0Thousands of parts potentially stocked at dozens of locations means planners don\u2019t have the bandwidth to proactively review inventory drivers.\u00a0 This results in outdated reorder points, order quantities, min\/max levels, and safety stocks that trigger replenishment at the wrong time for the wrong amount ensuring poor allocation of inventory investments and low planner productivity<\/p>\n

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Industry Focus<\/h1>\n

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