Service Snapshot: Inventory Optimisation Toolkit

“We know how much value is locked up in inventory. Everyone says we need to release cash. But we need to service our customers and stay agile.”
Is this an impossible dream?  No.

Challenge

Customer focussed and agile inventory management is what organisations need to move toward. Supply Chain risk needs to be managed and simple efficiency drives leave companies exposed. What is needed is a simple planning and optimisation tool, that will

• look at the whole of your supply chain,
• monitor all your inventories,
• watch the sales orders,
• monitor warehouse capacity and stock volume and values,
• know your supplier lead times and
• take into account the product wheel.

Then the system should recalculate on a daily basis from all the variables and

• Forecast demand
• Optimise inventory levels
• Plan supply of materials
• Plan production

and it should be easy to implement with SAP and other ERP systems.

Solution

We use a specialised toolkit that has been used in a variety of industries and with some world-class global companies.

At Penumbra we say:

Consider the customer, then optimise.

Our inventory toolkit allows you to do just that. Not the other way around.

The toolkit simultaneously considers all business processes, constraints, costs, and business objectives to determine the most profitable flow of materials, inventory levels, and utilisation of resources for any given planning horizon.

Through the use of patented models, advanced business processes, and consulting services, we can help you turn resources into a competitive advantage. By complementing existing ERP and APS systems and adding a profitability dimension to the sales and operations planning process, the solution exposes the cost-value tradeoffs at each point of the value chain.

It provides supply chain process control from dynamic daily forecasting, inventory leveling, production and distribution scheduling to procurement including upstream to suppliers and downstream to customers. With the inventory and lead-time toolset, organisations can push back intelligently on overzealous lean initiatives and inventory down-sizing.

It enables you to achieve the necessary balance to have inventories optimised by volume and value, and maintain service levels with clients that will keep you well ahead of the competition.

However, the best part is that it is relatively easy to implement compared to alternative systems.

A specialty products plant in Pennsylvania began to see a rise in “make-to-order” jobs. That rise began to hamper its regular stock production, increasing late orders and extending lead time to eight weeks. To compensate, the plant built up an excess inventory of parts and finished products worth U.S.$5 million, which represented about 5 percent of its annual sales. The plant used the tool to help it address its production challenges. After implementing the Enterprise suite of advanced planning modules, the plant cut excess inventory in half, increased on-time delivery, and improved planning credibility and forecasting accuracy.

Here is what the customer said:

“We chose this technology because of its depth of relevance in supply chain management and because it provided the best value.”

Benefits

Using the toolkit organisations can:

• Put the customer first
• Prioritise customers by service levels
• Then learn from past sales patterns and forecast future demand

Calculate the optimum inventory to hold for combinations of:

• Make to Order
• Make to Stock/Inventory
• Make to Customer

The results speak for themselves, 30-35 per cent reductions in inventory while maintaining 98 per cent and higher service levels with rapid ROI recognition. We have seen it save small to large clients from $3-100M in first year inventory and cost reductions with a particular focus on the process manufacturing and distribution industry.