Inventory Planning Scaled for You

Feature Article | May 26, 2004 by admin

Most small and midsize businesses (SMBs) that produce or distribute products have, at best, rudimentary software for managing their role as supply chain participants. Robert Anderson, SMB analyst and research director at Gartner (www.gartner.com), the leading resource for unbiased industry analyses, views supply chain management as an area where a well-targeted solution scaled to SMBs’ unique requirements can quickly provide returns that justify the investment.
Noting that few SMBs have embraced supply chain planning and optimization capabilities, Anderson believes that as the economy improves and order rates increase, supply chains will have to become much more competitive, doing a better overall job of meeting demand while reducing waste and inefficiency.
The first requirement for most SMBs will be to automate inventory planning, but it won’t be long before large customers want their suppliers to take an active role in both supply and demand planning.

Your inventory planning requirements

If you’re like other SMBs, your inventory planning process is a combination of manual data collection, complicated computations, spreadsheets – and “gut instincts.” Keeping track of reorder points for thousands of items is becoming an overwhelming task. However, automated replenishment and forecasting systems seem out of reach.
What are your requirements? Do you want to:

  • Reduce inventory by 20 percent or more
  • Reduce expediting and emergency shipments by 35 percent or more
  • Speed up planning by 60 percent or more
  • Control replenishment spending by 15 percent or more
  • Improve employee productivity and customer satisfaction

Do you want a PC-based planning and forecasting solution that automatically recommends what should be ordered and replenished? A solution that uses statistically proven forecasting techniques based on industry, usage, and sales history? A solution that interfaces seamlessly with SAP Business One?

This can be your inventory planning process

Here’s how simple it is to plan your inventory with SAP Business One and VALOGIX Inventory Planner:

  • VALOGIX Inventory Planner automatically imports and analyzes up to four years of historical data from SAP Business One for each inventory item.
  • Using the best-fit algorithm for each item, the planning engine calculates a forecast and replenishment plan for all inventory items. It looks at lead time, order frequency, and service level to set an optimum stocking quantity. Then it looks at on-hand and on-order amounts and suggests a replenishment quantity.
  • The planner reviews and approves the replenishment plan. Alternatively, the review stage can be bypassed.
  • The replenishment plan is transferred into SAP Business One where the order process is triggered and purchase orders created.

SAP Business One and VALOGIX bring inventory planning to small and midsize businesses.
SAP Business One has rich functionality around sales, inventory management, CRM, financials, and management controls. VALOGIX Inventory Planner enhances SAP Business One with automated capabilities for:

  • Forecasting future demand
  • Balancing and optimizing inventory
  • Recommending reorder points
  • Creating purchase orders

Let’s take an in-depth look at some of the features.

Automated forecasting

SAP Business One contains a wealth of information about an inventory item: Item description, cost, quantity on hand, location, and vendor. On just a few easy-to-use screens, VALOGIX Inventory Planner displays all the item information, plus the forecast. Users don’t have to waste time searching for the information because it’s collected from SAP Business One and presented by VALOGIX Inventory Planner.
You can easily review each item’s history and manually change the forecast. When you change a number for any month, VALOGIX Inventory Planner automatically plans for the change you make and retains the original value in case you decide to revert to the system-generated forecast.

Item-level planning and approval

VALOGIX Inventory Planner recommends stock levels for each item. At any time, you can manually edit these levels to accommodate special conditions. Once the stocking level is approved, a replenishment requisition is sent directly to SAP Business One where purchase orders are created.
Automated replenishment planning removes the guess work, improves accuracy, and saves valuable time. According to Tom Glacken, Vice President for Sales and Marketing at VALOGIX, some companies report that an employee can devote up to two weeks per month to complete a single planning cycle if inventory planning is done manually. Furthermore, few planners in SMBs have the requisite skills to identify and apply the appropriate algorithm to inventory items. With VALOGIX Inventory Planner, the time required to perform inventory planning is typically reduced by 60 to 90 percent – and the results are more accurate.

System alerts

Management by exception is part of the overall business philosophy of both SAP and VALOGIX. And customers recognize the powerful potential of alerts as implemented by SAP Business One and VALOGIX Inventory Planner.
You can think of alerts as watchdogs that never sleep. They are continuously monitoring your environment – evaluating data and business parameters. When a potential problem is detected, a message pinpoints the exception and sends an alert. You concentrate on those issues while VALOGIX Inventory Planner takes care of the planning process.
For example, an automated alert can cover stock-out conditions for any item that has forecasted demand but is not currently in stock. This situation can have a significant impact on your sales revenue and customer satisfaction. By getting an automated alert before this happens, you can proactively prevent a stock-out from occurring.

Inventory investment analysis

Having a good inventory strategy and item mix maximizes your ability to meet current and future customer demand. SMBs manage 1000s of items manually and over time the inventory can get out of balance. Once-profitable items are taking up space in your warehouse, while must-have items always seem to be in short supply. With a manual approach, your inventory planner may not be able to recognize and react to inventory trends simply because there’s no time to run reports or conduct research.
By pinpointing inconsistencies, exceptions and overstocks, VALOGIX Inventory Planner enables you to reduce excess and obsolete inventory while improving the active inventory mix to meet customer orders. The cash flow projections help you to understand your inventory decisions. According to Glacken, this function alone can result in a 30 percent to 50 percent reduction in inventory.

The benefits of connecting to the supply chain

Eliminate manual work and guesswork to determine forecasts, replenishment plans, stocking levels and reorder points. Because the system handles these tasks automatically, you keep current as business conditions change. Alerts warn you of potential problems before they happen, giving you time to proactively resolve an issue before it becomes a customer service problem.
Because excess and obsolete inventory items are identified, you can maintain your inventory at an optimum level for your current business conditions. Optimization re-balances your inventory mix, which further reduces costs while increasing insight and control of your inventory. You get an added benefit of improving your positive cash flow quickly and with less time.
As the national director of a high-tech service organization states, “The technology from VALOGIX will enable us to leverage the information available in our new CRM application to improve customer satisfaction and reduce our inventory investment.”
An aviation aftermarket customer states, “Valogix will help us achieve three goals: Improve planning productivity, create a better inventory mix to meet customer demand which increases sales, and reduce excess and obsolete inventory.”

Meet all your business needs

SAP Business One delivers out-of-the-box software that addresses all your business needs. SAP also has an extensive network of experienced partners like VALOGIX who are developing customized versions with additional capabilities.
To find out more, visit our website: www.sap.com/smb, or call the SAP Business One Response Center at +1-888-227-1727.
VALOGIX specializes in advanced value-based inventory planning software for small and midsize companies. For more information, contact Tom Glacken at +1-410-312-7780 or visit the company Web site at www.valogix.com.

Susan Twombly

Susan Twombly

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