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What inventory management aspects need to be considered these days with a promise to my customer?

The challenge of inventory management was ever since to have precisely the amount available for providing customers with the right products in the right time and thus reduce storage costs to an absolute minimum. These targets were, even with classical processes and IT landscapes, possible to achieve in the past.

With the rise of new technology triggers, expectations of customers rise accordingly. Excellent customer experience during a purchasing process is of utmost importance and service aspects are getting more important than the product itself. With the “Segment of One” approach, where every customer is seen as an individual, classical inventory planning cannot keep up with flexible accommodations, or custom configurations which customers expect these days. Slow update cycles lead to outdated information as new orders fly in constantly high speed. Limited inventory visibility increases error rate and supply shortages which will affect available-to-promise to the customers and can lead to customer churn.

This logistic challenge requires a synchronization of processes in the warehouse as well as in the entire value chain. Employees within a company’s value chain are tasked to do their daily work at high efficiency. Employees in sales, warehouse, production and purchasing therefore need to have the same source of truth to be able to rely on each other.

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From “Segment of One” at the Frontend to a “Unit of One” in your Backend

Inventory Management powered by SAP S/4HANA enables organizations to harmonize warehouse inventories, demand and supply planning, as well as using all data and analyses on a companywide fundament. With real-time processing of inventory postings and inventory values rather than overnight warehouse space can be reduced to a minimum and lead to higher accuracy of inventory, increase turnover and reduced days of items in stock.

Additionally, inventory management is in a position to take all production locations and external supply chains into account and can manage the changing demand for smaller lot sizes passing through entire logistic operations with all involved parties. It’s indisputable that a safety buffer in the warehouses is unavoidable. However, simulations and evaluations help managing capacities and quantities in a much more needs-based way than before. Real-time inventory information, including early error detection creates precise where-used information per unit. The ability to change a lot size to “ONE”, thus capturing the lowest level of granularity in inventory stock keeping is the result. A supplier in the healthcare industry achieved more than 1,400% faster operational reporting in inventory management.

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The supply chain stretches from planning via supply and production through packaging and finally to the delivery of the product, with various suppliers, service providers and internal operations working hand-in-hand. If an important component isn’t available in stock and thus cannot be delivered or production will be impossible, it will highly affect on-time delivery. Not being able to reschedule fast will cause costs. Therefore it’s also crucial to keep everyone involved in the process up-to-date. Particularly because products will be sold increasingly as services in the future, reacting fast to incidents plays a decisive role.

With an ultimate “Unit of ONE”, customers not only get the products of their choice but can change their order last minute before items reach the packing station. Rethink the way supply chain is controlled from an inventory perspective is necessary. This approach requires every single item to be posted in the system the same second it is removed from the warehouse and used for an order. This finally ensures customer satisfaction while shopping. It’s not enough to wait until night to synchronize stocks. Benefits for the warehouse are that inventory data is always up-to-date, so safety net (e.g. reduce buffers) due to increased transparency can be reduced.

Only with such transparency can companies cater to customer wishes at very short notice. This improves delivery performance, satisfies customers and finally ensures their loyalty. A prerequisite in the digital economy for sure.

Stay tuned for the next use cases and follow me via @SDenecken for latest news.


Overview of SAP S/4HANA use cases: #S4HANA - the use case series - Overview