Inventory Planning Blog

Inventory Performance Improved with Inventory Optimization & Analytics

In simple terms, inventory optimization balances the investment in an inventory to achieve a targeted service level or order fill-rate. 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.

Inventory planning managers are looking for simple ways to reduce waste and improve profitability.  It is becoming more apparent that advanced technology can dramatically help but the technology must be affordable, quick to implement, and have a high rate of return (ROI). But global supply chains and competition have increased the complexity and risk.

The year 2015 brings a solid outlook of improving global economies and growth opportunities. Balancing near term resilience with longer-term objectives is what is needed now.  Reducing costs, buying less, increasing productivity, improving cash flow are critical. Keeping these inventory objectives balanced and in perspective, you need an effective way to rationalize and prioritize important business demands.   Improve your competitive advantage responsibly and efficiently without incurring major costs should be at the top of your list.  Waiting until its too late in your ordering cycles will invite your customers to buy elsewhere. Reducing the wrong items at the wrong time only exacerbates the issue.
 
If your company tends to reduce items with the highest investment because it creates a larger reduction faster, what it actually does is create potential stock outs, more backorders and increased expedited shipping – and, even more importantly, customer dissatisfaction.  We all know that when customers are unhappy they become former customers.  Randomly cutting inventory has been proven repeatedly to be the wrong strategy as does overstocking your inventory. As supply chains grow more complex, manual planning using spreadsheets can cause losses. Yes, you can create them to be specific to your business but they are hindering your growth.

Now, more than ever, you have many affordable choices for improving your inventory investment and performance. The Cloud is a viable alternative to investing in On-Premise inventory software. Software-as-a-Service (SaaS) provides an affordable and flexible way to utilize some of the most powerful inventory planning solutions on the market.

Why should you be interested? SaaS applications provide many benefits you just cannot achieve on-premise.  Benefits include:

Lower upfront capital: By going to a SaaS model, you avoid the up-front capital requirements and funding requests, and pay for the software as an on-going expense.

Faster implementation: There is generally less overall set-up time, and in some cases, companies can often leverage the hosted solution’s existing integrations with existing key ERP solutions.

Faster “time-to-value”: Given a more rapid implementation, the time-to-value and positive cash flow returns are more rapid than a traditionally deployed on-premise implementation.

Reduced internal IT resource requirements: No installed application software or hardware to manage over time.
 
Overcome objections to best-of-breed software: Some companies are finding that they are able to overcome the objections or rules against implementing software that does not come from the company’s ERP provider if they use a SaaS model.
 
Fit for “on-demand” usage: Users can truly access these solutions when they need them anytime and anywhere 24x7.

Staying current with technology: The software will periodically be automatically upgraded with enhancements to functionality. This should serve to keep users on the current platform, and keep them from falling behind the state of the art over time, sometimes badly so.

So, before you wait another moment, do yourself, your employees, and your customers a favor. Take a serious look at Cloud-based inventory planning and optimization solutions and begin 2015 with a clear path to success.

As the president or owner of a company, you are expected to lead, and in most cases, make all the decisions. It’s not easy sitting at the top with employees and customers depending on you to make the right call. But here you are faced with many challenges including tough local and global economies, a growing number of new items, inactive and obsolete stock and other daunting inventory issues.

Up to now, you have relied on spreadsheets and reports and maybe a basic or old business management system. You know mistakes have been made, costly ones that cost you both in cash and in losing customers. There is no IT department in-house to help you determine if a new ERP or Accounting solution is required or an inventory forecasting solution or maybe a more advanced inventory planning and optimization solutions.

So, you sit there and consternate on what to do. What move to make next. Time passes, months go by and still you are in the same position facing the same but growing issues and decisions. Does it really matter that you are maintaining the status quo? The business is doing Ok. It could be doing better but you are so busy there is no time to stop and think.

Well, this lull in decision making is costing you a lot more than you think. Every day that you delay in upgrading your business processes and software solutions costs you, time, money and customers. Today ERP systems like NetSuite, SAP Business One, Sage and a host of others really do make a difference. They help to provide the visibility and data required for quicker, more correct decisions. NetSuite, for example, is a hosted cloud-based solution which makes it affordable and fast to implement requiring no additional hardware and IT support in your company.

Augmenting those systems are the modern advanced inventory planning and optimization solutions. Many are seamlessly integrated into these systems making them a richer, more intelligent system and one that is easier to implement. A few of truly cloud-based built more the ground up taking advantage of modern tools and technologies.

Basically, advanced inventory planning and optimization solutions automate the entire inventory planning process. These systems automatically import data from the master system, generate a forecast, optimize the inventory and create inventory replenishment requirements. Optimization is very important because it balances inventory investment with customer service levels. It makes the hard decisions for you and presents the data in easy to understand formats.

You can save a lot of time and money, reduce overstocks and avoid buying more of the wrong items. It will impact your bottom line cash flow and help increase your competitive advantage. All really good things and all you need to do is unfreeze yourself and make the decision to get your business software up to date. Procrastination is easy telling yourself tomorrow is the day. Doing can be just as easy!

Web-based demand planning and optimization products help companies reduce costs, increase productivity and offer a very quick ROI. In concert with a cloud-based ERP system like NetSuite, provides the users with an automated easy to use product. Planning and managing any inventory is a serious challenge and one that can be rewarding if done correctly and efficiently. Automation of the entire planning process from forecasting to replenishment to optimization and analytics is critical in order to keep up with the changes in demand and supply.

Discover an affordable, seamlessly integrated inventory optimization solution to SAP Business One for small and midsize businesses. A solution that frees up your resources (including cash), reduces losses from obsolescence, and increases service levels. The tools you need to forecast, plan, and optimize inventory, manage your business more efficiently and meet the demands of customers and suppliers are powerful and affordable.

Inventory Planning and Optimization the Key to Your Inventory Success

Well, it’s a new year that brings slowly improving global economies. In these challenging times, it is important to balance short term resilience with longer term needs. You will hear a lot about reducing costs, buying less, increasing productivity, improving cash flow and more. It is important to keep these inventory objectives balanced and in perspective. Yes, currently, times are interesting but, as economic growth gains momentum you will need to improve your competitive advantage.

There are a lot of inventory planning solutions available from all types of companies around the world. Many are designed for large enterprise companies as they cost hundreds of thousands of dollars and are highly complex. Some so complex a math or science degree is required just to operate the system. Others at the low end may be just point solutions for just forecasting, as an example, or offer individual modules you need to buy separately.

Most of these solutions include a forecasting capability either their own or from an included third-party provider. They usually also offer min and max levels, safety stock and replenishment calculations. Most require you to manually set replenishment levels and have you select the appropriate forecast method.

But 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 climate.

First of all 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.

Secondly, 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. Trying to plan with spreadsheets is even a worse situation that will eventually lead you to higher costs and lower service producing a higher level of customer dissatisfaction and lost business.

Complex Environment Creates Inventory Challenges

Inventory management has become more challenging in today’s complex and competitive business environment. Yet many companies are still maintaining inventories manually, and  performing complicated computations using spreadsheets and point solutions. Keeping track of reorder points can become an overwhelming task as businesses grow. And standard spreadsheets offer little help in driving down costs and improving revenues because they are time consuming and frequently contain multiple errors. Ray Panko, University of Hawaii compiled data from numerous studies that indicates up to 90% of spreadsheets contain significant errors.

Where is the money hiding?
It is common to find excess and obsolete stock representing thirty-sixty percent of inventory and to find that five-forty percent of the time customer demands cannot be met (based on Valogix’ experience). At worst, companies lose sales; at best, they must ship items at a premium in order to fulfill orders, further driving down the profit margins.

There is good news on the (inventory planning) horizon
Automated planning tools are designed to remove complexity and improve inventory mix. They dramatically reduce the amount of time required to properly plan inventory. By automatically forecasting, replenishing and optimizing, companies can manage inventory more efficiently and meet the demands of customers and suppliers at lower costs for a powerful competitive edge.

Optimize Your Inventory Planning