In today’s fast-paced business environment, effective supply chain management is not merely an aspirational goal. It is a crucial necessity for any organization striving to reach the highest levels of efficient supply chain operations. Efficiency ensures products are delivered to customers on time, leading to a significant impact on the company’s financial health. Only then will the organization achieve Business Maturity® – the ability to meet and exceed its business goals through leveraging SAP.
One of the key efficiency challenges faced by supply chain managers, buyers, and chief procurement officers is excess inventory, which can have a detrimental effect on the financial well-being of a company. Often, it ties up a significant amount of working capital while occupying valuable floorspace that could be more profitably utilized for other purposes.
When we undertake to achieve a greater strategic understanding of SAP, we gain the insights to optimize our supply chain, reduce excess inventory, and improve working capital.
The Challenge of Excess Inventory & Working Capital
To address this two-pronged challenge, we must review master data settings that drive order quantities and frequencies. By ensuring these settings are aligned with actual business needs, we avoid ordering more than required and prevent excess inventory from piling up.
That sounds easy enough. Then why don’t we do it? Traditionally, organizations have relied on spreadsheets to maintain data that is related to purchasing trends. We use these sheets to inform our ordering decisions. However, this manual approach is not only time-consuming, but also prone to errors and misalignment with actual demand.
Instead of enabling the system to do the work it is designed to do, supply chain managers resort to ordering more than required to avoid the risk of stock outs or disruptions in the supply chain. They do not trust the plan in the system. By not relying on SAP as the one source of truth, the excess inventory problem becomes more exacerbated and even more working capital is tied up.
Streamlining Supply Chain Processes Starts with Trusting SAP
When SAP is relied on as the one system of record and master data becomes aligned with business rules, the result is a reduction of total inventory value. Order quantities and frequencies become based on actual business needs.
And it only gets better. SAP pairs up procurement processes with actual demand. By streamlining order processes and relying on SAP settings, tools and reports, we know with greater certainty that the right material is on hand at the right time without overstocking. As a result, working capital management is improved, and the risk of dead stock – which can become obsolete or lose value over time – is minimized.
Unlocking the Potential of SAP for Supply Chain Optimization
To address supply chain complexities and disruptions in the supply chain, companies increasingly turn to experts in SAP and supply chain optimization, such as Reveal. We use proprietary methodology and comprehensive training on standard procurement agreements to streamline order processes and minimize manual intervention.
By embarking on this transformative journey with the right guide, you can get to your destination – reduced inventory, streamlined processes, and improved financial health – with greater speed and alacrity. And that provides the competitive edge.