Wednesday, September 4, 2013

Benefits of Inventory Optimization

Inventory optimization is essential to retailers and manufactures to save costs and reduce safety stocks. Also, by forecasting demands and supply through Analytics tools, companies are able to improve the service level. Nowadays, I came to know about SAP inventory optimization suite known as SAP Enterprise Inventory Optimization (EIO). This software extracts data from ERP systems and imports the data to SAP EIO. This software will automatically optimize stocks such as prebuild, safety, and on-hand stocks based on lead time and service levels.

In addition, AIM (Analytics Intelligence Module) enables end users to review which stocks have abnormal behaviors such as high standard deviation. Based on this result of AIM, retailers and manufacturers can predict and order stocks in a timely manner to reduce safety stocks and improve service level.
SAP customers include Caterpillar, John Deere, HP, Honeywell, Kellogg’s, Unilever, ConAgra. 

The benefits of EIO:

Improved customer service levels

Significant lower inventory
Reduced operational costs
increased planner productivity

This inventory optimization software includes multistage inventory planning (MIPO). Instead of single stage inventory planning, MIPO has customer face nodes and internal stocking point nodes so that they can calculate different service levels of customer face (CF) and internal stocking point (ISP) nodes. Also, trimming algorithms will improve optimization process.

Today, we have access to tons of data. To make a difference in a competitive market, getting a competitive advantages by investing in supply chain planning cannot be overlooked. Most industries' IT spending has increased annually. Companies should acquire an ability to forecast future demand and supply of stocks and make a strategic plan for the future.


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