Inventory Planning Blog

Multi-Echelon Inventory Planning for NetSuite

Posted on Tue, Sep 02,2014@10:09 AM

NetSuite, Valogix, inventory planning, inventory optimization, cloud, SaaSNetSuite inventory management software offers inventory management, manufacturing, and purchasing capabilities that can help improve supply chain management. Now, available with multiple location capabilities it offers more for growing and larger companies.

However, you may want to explore how a more advanced inventory planning and optimization solution can further improve your supply chain performance. NetSuite recognized Valogix with their 2013 Supply Chain Partner of the year Award for successfully providing dynamic, automated multi-echelon planning and optimization.

Organizations with large inventory operations work with multiple levels of supply.  Central sites purchase and stock most of the items.  Slow-moving and less important items can be sent quickly to remote sites when needed, while fast-moving items are stored closer to the customer to enable more rapid customer service.

Advantages of the “multi-echelon” supply chain planning include:
  • Consolidating inventory reduces the quantity required
  • Consolidating purchasing gives greater leverage to obtain discounts from suppliers
  • Balanced stock mix at all locations
However, multi-echelon planning brings considerable complications as well.  How much of a particular item should be stocked at each location?  How should the company support transfers of stock from one location to another?  If an item is on short supply, how should it be allocates down from the central warehouse to other locations? How does multi-channel selling (know an omni-channel) to the customer effect the distribution of stock?

Inventory planning for finished goods has become more complex and costly. The ever-increasing number of new Items (SKUs), changing demand patterns, and increasing transportation costs are taking a toll on a distributor’s bottom line.  Especially difficult is planning items used both in kits and sold separately. Further complexity comes from planning for multiple locations and accounting for substitutes and supersedes. 

NetSuite, Valogix, inventory planning, inventory optimizationAssume we have three locations supplied by a master warehouse, which has a planning horizon of 90 days. It also has a forecast of 90 units for that three-month period for an item.

Through the advanced algorithms in VALOGIX Inventory Planner, we can predict that:

• Location 1 will place a replenishment order for 30 units 16 days from now;
• Location 2 will place an order for 20 units in 27 days;
• Location 3 will place an order for 40 units in 7 days.

It is not just about having visibility and the capability to manually set safety stock and min/max levels for multiple locations. It is about having the right, balanced mix of items at the proper location at the right time. Using inventory optimization to dynamically plan and replenish multiple locations is a much better, proven method. That fact that the optimization is automated dramatically improves productivity and reaction time to changing demand.

What inventory optimization does is balance the investment in an inventory with the fill-rate (service level) goals of a company across all locations. There are also financial considerations, constraints that can also be applied in the development of the algorithm. These highly complex algorithms work behind the scene so as not to confuse the user or make them fearful of using optimization to help manage their inventory.

We have determined that you can dramatically improve the effectiveness of the optimization algorithms by adding heuristics into the overall process equation. Heuristic refers to experience-based techniques for problem solving, learning, and discovery. Heuristic methods are used to speed up the process of finding a satisfactory solution, where an exhaustive search is impractical. Valogix incorporates heuristics into all processes.

So consider the capabilities carefully when planning multiple locations:

Valogix automates the entire inventory planning process:
  • Forecasting & Planning – every item at every location
  • Stock Level Setting – considers forecast, lead time, order frequency,
  • Desired service level and variability in demand
  • Replenishment - Purchase Orders, Production Orders, Stock Transfers
Optimization – cost reduction & control - strategic planning analytics
  • Easy to use and highly effective
  • Avoids disruptions from costly stock-outs
  • Exception based – alerts warn of potential future issues
  • Planning Groups give unparalleled planning control & flexibility
Time-phase plans all items at all locations simultaneously
  • Items used in B.O.M.s and Kits as well as those sold independently
  • Back-schedules to cover longest lead time of components
  • Considers substitutes and supersedes
  • Synchronized planning for smooth-flow inventory availability
The customer results of using Valogix inventory planning and optimization show they achieve:
  • Reduced inventory by 20% to 40% or more usually within 6 months or less
  • Reduced expediting and emergency shipments by 35% or more
  • Improved productivity by reducing planning time by 60% to 80% or more
  • Controlled and reduced replenishment spending by 15% or more
  • Improved service levels by having the right items available when your customers want them by 5% to 15% or greater
  • Reduced stock-outs by 15% - 30% or higher
  • Increased sales of 15% to 15% or more
  • Reduction in cost of goods by 5% to 10% due to improved vendor relations

Download our e-book  The State of Inventory Planning

   

Tags: Inventory Planning, cloud, inventory optimization, SaaS