Inventory optimization solution
Case study of a company with too much inventory
How to implement an inventory optimization solution in a company with too much inventory and achieve significant economic benefits.
Real life experience : Our company has too much inventory.
If a requested item is not in stock, there is a good chance that the company will lose that order and several more, and the customer may not come back. Determining when to order is based on rudimentary spreadsheet models that required extensive manual adjustment.
Past and Present Planning Software
The Company has about 6-8 planning folks in the room. These folks would range from the Director Level to Manager, Planning to Planner I/II/III with 2-20 years of planning experience. Past and present planning software used by members of the team would be a common Demand planning software.
Sales as Priority
The company measures, drives and discusses top line sales as priority 1 always. In a 2 hour business review meeting the company spends 1.75 hours talking about customers, competition and market share. They do not talk about order cycle time, fill rates, cost per unit, accounts payable or inventory.
Statistics Course and Spreadsheets
Right now, most planners use spreadsheets. Inside the company they talk about safety stock but most folks can’t calculate safety stock. Most had a statistics course back in college but they would probably be embarrassed if they were quizzed on standard deviation and normal distribution curves.
Monthly Sales & Operations Planning meeting
The company has a monthly Sales & Operations Planning process/meeting but they constantly discuss how to chase sales orders and expedite components from suppliers and make plant schedule changes to keep customers happy. The company breaks business rules and jump through hoops to get orders out knowing they are diluting margins to do so.
Supply Chain industries mainly rely on the materials to progress and grow, and maintaining all these parts available, requires large amount of investment.
Supply chain management and inventory optimization are a major source of savings and necessary for the efficient functioning of the company. Smart Inventory Planning and Optimization helps you keep the right inventory levels when you have intermittent demand. Our main goal is to ensure that the crucial parts are always available, helping your company Increase service levels, and reduce inventory costs.
1. Create a process, strive for disciplined execution, create business rules, create capability to run reasonable models to manage trade offs and make better decisions.
2. Find the sweet spot between cost, inventory and fill rate.
3. Build an industry best planning team with advanced planning competencies and tools.
4. Drive optimization and associated favorable business results.
5. Educate and ground the Team in the science of planning and inventory optimization.
6. From that foundation, create a planning process that defines roles & responsibilities.
7. Enable that process with appropriate software.
8. Execute and reduce inventory costs
1. Are demand planning, supply planning and inventory strategies the same for all customer channels?
2. When is a system statistical forecast better than a human forecast?
3. If the order fulfillment strategy is related to a forecast (inventory model), then how to plan and execute to achieve a target inventory level for the full range of SKUs that can be offered to customers?
4. Talking about min-max, safety stock, economic order quantities, demand during lead time and so on ….. the team gets lost. What can be done do to improve this?
With Smart Inventory Optimization you can:
- Smart IP&O delivers inventory policy decision support and the means to share, collaborate, and track the impact of your inventory planning policy. This can help realize millions in savings by improving customer service and reducing excess stock. You can forecast metrics such as service level, fill rate, holding costs, ordering costs, and stock out costs. Users can identify overstocks and understocks, adjust stocking policie when demand changes, share proposed policies with other stakeholders, collect feedback, and establish a consensus inventory plan. And unlike traditional inventory planning systems that rely on rule of thumb approaches or require the user to arbitrarily set suboptimal service level targets, Smart Inventory Optimization prescribes the optimal service levels for you. Users can optionally assign service level constraints to ensure the optimization engine respects business rules. SIO provides the required inventory planning parameters for a variety of replenishment policies such as Reorder Point/Order Quantity, Min/Max, Safety Stock Planning, and Order Up to levels.
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If you request a demo, one of our specialists will show you how Smart can help, using your own inventory data!