Inventory Optimization

Inventory Optimization Challenges

Inventory Optimization Challenges

Poor use of system planning tools and evaluations leads to a combative response to demand fluctuations. This drives up both operating cost, as a result of ineffective planning, and operating capital, as a result of inflated inventory.

During the implementation of SAP, a company focuses on getting the transactional system working to support its business operations. As a result, the business users are taught how to feed the system with transactional data in order to get documents, such as purchase orders, delivery notes, and invoices, out. Never are people shown how to manage, or even improve, their business using this information that is already available to them within the system. There is a distinct lack of knowledge on how to use or interpret the valuable reporting and management tools available to users in standard SAP.

In this tough economic climate, organizations face continued pressure to increase profitability with fewer resources (less material, fewer people, and less overhead). In order to successfully achieve doing more with less, people need to work more efficiently and make effective decisions regarding the availability of material and use of resources. It is possible to be effective without being efficient; therefore, system tools and information need to be used to strike this balance. To do this, the tools need to be clearly understood and used correctly.

The Solution: Inventory Optimization

Evaluate the tasks that buyers and planners are filling their days with. Proportion the amount of time that is spent in a typical month on mundane transactional data capturing and correction vs. value-added activities like optimizing and balancing supply and demand as a result of analysis and reporting. Buyers and planners should be spending up to 60% of their time on value-adding functions and improvement of supply chain performance.

Key Benefits of Optimizing Inventory

  • Improved morale
  • Improved planning effectiveness
  • Improved user confidence
  • A team that is focused on results rather than being focused on tasks
  • Reduction in inventory value by an average of 10-20%
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