Download - Inventory Optimizer
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Improve Supply Chain Efficiencies
using SAP Software
M. Raghunath, Vice President
Patni Computer Systems
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Strictly Confidential April 2007
Typical Supply Chain Issues for Large Organizations
1. The Forecasting Accuracy Problem - typically
60% or less in CPG, food & pharma even less
2. Inventory Disposition Problem - Dead inventory
accounts for 5% of overall inventory, increasing
overall supply chain costs & operations
3. Inventory Visibility & Optimization Difficulty in
tracking inventory at global level and having drill
down capability for decision making
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Strictly Confidential April 2007
1. The Forecasting Problem
0%
25%
50%
75%
100%
Mar
AprM
ay Jun Ju
lAu
gSe
pOct
Nov
Dec
Jan
Feb
Mar
Apr
Get the Top Customers Right
Problems in Forecast Accuracy at the top
accounts creates instability in the valuechains inventories and customer service.
Gain unprecedented access to TopRetailers information
Improve the business processes drivingpromotional and baseline forecast creation
Shared KPI metrics among departments todrive continuous improvement
Gain efficiencies in the forecastingprocess by leveraging SAP/APOtechnology
The Need
Improving process, technology, communication and Metrics
Forecast Accuracy is usually below 70% at department store level
Forecast error leads to either stock out/missed sales or high inventory level at DC
Large Customers account for a disproportionate
share of the supply chain
Tools available to provide visibility of POS &
Inventory data on daily basis
Move from gut feel to knowledge based decisions
Manage politics & conflicting pulls from different
stakeholders
Current Relevance
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Solution: Collaborative Process with APO DP
Provide Forecasts
to National
Demand Planning
Analyze Past
Performance
Create Baseline
Statistical
POS Forecast
Incorporate
Promotional
Impacts
Collaborate
with
Customer
Create the
Order Forecast
Add Business and
Customer Intelligence
to Order Forecast
Reach
Consensus on
Demand Plan
Understand
Customer
Inventory Strategy
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POS based Forecasting Model Useful for Global CPG orgzns who would like to use POS (Point of Sales)
based forecasting to ensure optimum inventory levels at their DC, customerDC and stores by calculating optimum order quantity.
Calculation of optimum order quantity is based on applying various planning
parameters such as customers inventory policies, different time lags, target
coverage days etc
Business Problem
Patni Solution
Calculate optimum order qty, statistical POS forecast, internal matrices, etc
Leverage statistical forecasting in DP and apply that to POS data - Algorithmsbased on DP macros (thus avoiding SNP) and on actual customer data
(received through POS)
Improved accuracy in SKU replenishment
Improved efficiencies across supply chain & reduction in inventory costs
Enhanced customer service and communication between the client and itscustomers
Business Value
Solution can benefit any CPG/Hi-Tech client who wants to leverage SAP SCM investment for customer
based forecasting Visit Booth # 1347 & see demo of solution
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Strictly Confidential April 2007
Typical Supply Chain Issues for Large Organizations
1. The Forecasting Accuracy Problem - typically
60% or less in CPG, food & pharma even less
2. Inventory Disposition Problem - Dead inventory
accounts for 5% of overall inventory, increasing
overall supply chain costs & operations
3. Inventory Visibility & Optimization Difficulty in
tracking inventory at global level and having drill
down capability for decision making
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Strictly Confidential April 2007
2.Patnis Inventory Optimizer
Identification of slow-moving inventory
Standard SAP solution identifies slow-movers based on material movements for past x days
Patnis Inventory Optimizer takes into account the Forecast Information from Planning Systems to
identify slow movers
Action on slow-moving inventory
Standard SAP Solution does not provide mechanism for taking action on Slow Movers or Monitor the
progress of the same
Patnis Inventory Optimizer provides facility to take action on identified slow movers and monitor
the progress of action taken
Action taken is integrated with backend system
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Features
Identify non-performing SKUs based on Profitability
thresholds
Implement an action plan with speed and flexibility to
dispose off non-performing SKU i.e. repackaging,
trashing etc.
Choose, define and modify an action plan for
inventory disposal
Monitor progress in the implementation of action plan
for inventory disposal
Reports, alerts, and notification for visibility,
escalations and exceptions in the implementation of
action plan
Monitor Progress of Elimination Process
Overview Reports for Senior Management
Escalations and Alert Enablement
Inventory Optimizer Features
Inventory
Monitoring
And
Disposition Planning
Measure
Optimize Analyze
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Typical Inventory Optimizer Architecture in SAP
Environment
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User logs onto Portal
Based on his role /
profile, he views list
of slow moving SKUs
For all SKUs in the
region, calculate
diff. of Inventory
levels and forecast.
Compare to
parameter value and
tag as slow/non/fast
mover Create a screen to
show this list
Process Flow
Step 2 Step 3
Action Plan Owner Approver
Step 4
SKU Inventory
ERP e.g SAP R/3
Demand Plan
System
e.g. i2, Manugistics
Role
Process
Step
What happens?
How?
Business Logic
to be developed
in xApp
Backend System
Functional Area
Enterprise
Services ReadInventory data
at SKU level
Read DP data at SKU level
Step 1
User chooses to
either create new
action plan or
view status of
existing action
plan and if
necessary, modify
the same.
This includes
dashboard reports
for monitoring
the status ofaction plans
After creation /
modification of action
plans, he can submit
the action plan which
will be sent for
approval based on the
workflow maintained.
Workflow process is
triggered when the
owner submits the
action plan and
notification mechanismtakes over to notify the
approver of a pending
work item for approval
Approver approves /
disapproves the action
Plan. If approved, the
information is stored
persistently in the CAF
DB, else a notification
is sent to the owner
regarding the
disapproval
Workflow process is
triggered when the
approver approves/rejects the action plan
and notification
mechanism takes over
to notify the owner of
the status of the work
plan
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Inventory Optimizer Plan Status Report
Summary
Report on Plan
Status
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Thank You