Over the past two months, I had the opportunity to join SAP customers such as Johnson & Johnson, Estee Lauder, PPG, Molex, and Campbell's Soup at the North American and European SmartOps (an SAP Company) User Group meetings.
Here are my 3 takeaways from the sessions:
1) What you put in is what you get out
When trying to understand the Inventory Optimization recommendations it is more important to focus on the INPUTs than the OUTPUTs. Most planners would look at inventory targets and try to compare them to what was previously recommended. However, the best way to make sense of the outputs is to look at the inputs. That is where the best clues are to decipher what the algorithms are using to come up with the optimal recommendations. For example, a reduction in lead time or forecast error can further reduce the safety stock recommendations. Dave Hrivnak from Eastman Chemical recommended using data mining and visualization techniques to identify data anomalies such as abnormally high or low lead time.
2) Speak the same language
PPG, DuPont, and Eastman Chemical talked about how SAP Enterprise Inventory and Service-Level Optimization provides a common ground for communicating inventory and service level drivers. A common toolset that takes a holistic view of all the required considerations to make a data driven decision allows stakeholders to have an intelligent conversation about policies and inputs instead of assigning blame about what is happening in the business. For example, if 2 orders are cut because of a product availability issue, but the service level target is still met then a discussion about service levels and inventory investment can be held using the cost to serve report.
3) Boil the water... slowly
Often times, planners are reluctant to accept targets if there is a big change to their current operating model. Therefore, to facilitate the buy in for the optimized inventory targets, a “step down” (or "step up" in some cases) approach is very effective to get the planners comfortable. A “step down” approach involves gradually adjusting the inventory targets closer to the optimized recommendations until the planners are aligned with the optimization. Users discussed the millions of dollars of inventory reduction that they were able to achieve through this approach.
I’m always excited to discuss best practices with our SAP customer base. Tackling complex multi-echelon supply chain optimization problems is never an easy feat. However, with the help of SAP’s integrated Supply Chain Management Solutions and an engaged customer base, every day SAP users achieve millions of dollars in reduced inventory and improved service levels.