inventory levels is no
longer a once-a-year
task. It’s an essential
activity to be revised as
new products are
introduced, promotions are launched,
and other volatile
FIGURE 1 Q SAP solutions
enable companies to achieve
the three success factors that
are critical to becoming a
demand variability, understanding inventory costs
and lead times, knowing customer service policies, and taking supply variability into account.
How SAP Can Help
The SAP Enterprise Inventory Optimization
application by SmartOps works with SAP Busi-
ness Suite software to help you dynamically and
reliably determine optimal demand-driven, time-
phased inventory targets for every item at every
location throughout your supply chain. This
insight enables you to keep inventory levels low
while maintaining target delivery service levels.
More specifically, the application allows you to:
Make better decisions and more effectively
optimize operational targets as a result of
better insight into the supply chain. SAP Enter-
prise Inventory Optimization uses advanced
algorithms to automatically set inventory
levels as a function of your demand patterns
and customer service objectives.
Increase your supply chain’s productivity and
effectiveness with improved visibility into
inventory cost drivers and automated, reliable
processes for focusing on the highest-value
products and customers. Service levels can be
set to follow specific company policies regarding customer segmentation and products.
Improve customer service, customer satisfaction, and customer loyalty by ensuring better
order fill rates and on-time deliveries. Adjusting
inventory levels automatically enables more
frequent adjustment to adapt to changing market conditions, pricing, and promotions.
Strengthen your competitive position by freeing your working capital for more strategic
pursuits. There is often significant capital tied
up in inventory that does not turn and thus
may end up becoming obsolete.
3. Shrink Your Time-to-Action with
Also integral to achieving a demand-driven supply chain is the ability to do high-speed replanning
and what-if analysis so that you can rebalance
supply and demand based on the latest information from suppliers and customers. This responsive
planning enables you to react quickly to changing needs.
As a supply chain planner or customer service
manager, you make various decisions every day,
such as: “Can I honor this customer’s request to
increase its order?”; “How do I adjust to a delayed
supplier shipment?”; or “I have an excess of XYZ
component; can I promote a product that will consume it?” A new class of planning solutions called
“Response Management” addresses such needs.
These solutions go beyond traditional material
resource planning. Besides identifying materials
shortages, they determine which orders you can
commit to and which orders you can delay based
on your priorities. They take into account your
finite materials and capacities, consider alternative
sources, and optimize the use of substitute parts.
And with product life cycles constantly shortening, these solutions help you plan for new product
launches and engineering changes to enable you
to consume soon-to-be-obsolete materials.
Demand-driven companies strive to reduce
their “frozen period” — that is, the horizon in
which plans cannot be changed — to make final
build decisions as late as possible to address these
types of changes. These companies control the
actual moment of order launch to the plant or
contract manufacturer to capture the best
demand mix. As a result, order commitments are
met, and available stocks and capacities are utilized efficiently. Ultimately, these companies can
then benefit from enhanced revenues due to captured upside opportunities, improved customer
SAP Supply Network
SAP Supply Chain
ment by ICON-SCM
Enables cooperation and knowledge sharing across
the supply chain to optimize visibility, control, and
efficiency of planning and execution processes
Sets appropriate inventory targets for every item
throughout the supply chain as a function of vari-
ability, seasonality, and promotions to keep levels low
while maintaining target delivery service levels
Supports rapid replanning, demand reprioritization,
and what-if analysis to respond to changes in demand
Jul n Aug n Sep 2011 | sapinsider.wispubs.com | © 2011 Wellesley Information Services.
No portion of this publication may be reproduced without written consent.