Inventory Planning Blog

As the New Year begins, today’s challenging business climate is forcing managers to look for simple, yet effective ways to reduce waste and improve productivity to increase profitability and service. Finished goods, production materials and service parts inventory planning are prime candidates. With thousands of items to manage, sometimes at multiple locations, the lack of scientific automated tools has made the job almost impossible leaving companies with too many of the wrong items and not enough of the critical ones. The result is unnecessary inventory expense, while suffering service-limiting stock-outs.

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.

SAP Business One 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 companies.

There are a lot of inventory planning solutions from all around the world. Many are designed for large enterprise companies. They cost hundreds of thousands of dollars and are highly complex. Some are so complex a math or science degree is required just to operate the system. Others, at the low end, may only be point solutions for forecasting, as an example, or offer individual modules you need to buy separately. Several of these solutions include a forecasting capability either their own platform or from an included third-party provider. Most have you select the appropriate forecast method and require you to manually set replenishment levels, like min & max. How is this any better than using a spreadsheet?

How many offer real inventory optimization and why is this important? There are many reasons why inventory optimization is critical for conducting business in today’s ever challenging economic and consumer-oriented climate. An advanced supply chain planning system should also rationalize the inventory levels and investment in light of the expected demand and other variable conditions.

First, what is the cost of carrying, holding and managing an inventory?  The costs for most items are steadily increasing, real estate costs and taxes are up and shipping costs are through the roof. Inventory optimization provides a great balanced inventory to meet expected demand, while reducing costs and better controlling spend for additional stock purchases. Planning in a timelier manner reduces the need for expediting orders in from vendors, which in-turn reduces the need for expediting shipments to customers.

Second, inventory optimization dramatically improves the financial performance of an inventory because buying and stocking are more in-line with expected customer demand. It helps to reduce and almost eliminate the future build-up of excess inventory and dead stock.

Third, there are too many known and unknown variables that can affect your inventory and subsequent customer service levels to manage properly. Just forecasting and planning your inventory leaves you wide-open to problems in meeting both your financial goals and customer expectations.

When purchasing items for your business, you need to properly assess the value of what you are buying.

What is your position about planning in the Cloud? What are your competitors doing or likely to do? Are they staying the course on-premise or are they adopting new methods and technologies to improve their business performance? Are they already in the Cloud

Previously, we discussed the different industries, uses and planning of parts. Today, the OEM replacement of parts is happening at an ever-increasing rate as technology allows for improvements in performance and longevity.
The graphic below shows the important milestones in a part’s life cycle. These have an impact on inventory planning for each item. This section examines how those milestones impact parts planning.

Inventory planning for aftermarket and OEM parts require appropriate skill sets and knowledge of the industry, markets and the customers. Advanced inventory planning software is critical to successful manage parts and meet tough customer demands and timing. 

What You Don’t Know but Soon Will                                                                                     

Your Choice to Change is Not So Easy, or is It?   

The vast majority of companies that maintain an inventory use spreadsheets and reports. Some companies have had their overburdened IT departments build them a custom solution. In the scheme of things, these choices may work for a time but after a while they become a barrier to successful inventory planning. So, do you stay with the manual burdensome current process or move to a better way to plan? 

Effective and efficient supply chain inventory planning teams are absolutely critical to meet the ever-increasing demands of customers. Teams are getting fired up to meet the company goals and deliver service excellence. There is a dizzying array of solutions and methods companies employ to manage their supply chain hoping to manage their unique challenges. 

2018 ended on a lot of stock market jitters over the trade war with China. The markets lost most, if not all, their gains and then some. The outlook for global economies and growth opportunities have also cooled. Brexit, the UK exit from the EU, is disrupting supply chains. Inventories are building and planning for them has become more erratic.

The performance gap between customer experience leaders and runners-up is widening, with those on top being disproportionately rewarded. Gartner Inc. said organizations must ignore three myths in order to achieve a superior customer experience.