Striking the balance between too much and too little inventory can deliver immediate and meaningful benefit.
Too little inventory negatively impacts the ability to meet customer demand and too much decreases working capital. Ultimately the goal should be to get it right as either scenario leads to diminished profits.
Benefits of finding the correct balance include:
- Increased customer service levels
- Sound inventory turnover rates
- Improved planning accuracy
- Better warehouse organization and employee efficiency
- Elimination of dead and obsolete stock
- Decreased holding and management costs
- Increased return on the investment in SAP
Inadequate maturity of SAP processes can lead to a system that is disconnected from the reality of a warehouse’s inventory position. This results in a lack of trust in the system and often forces employees to manage inventory outside of the system of record. The resulting loss in operating efficiency and inflated inventory levels drives up operating costs while simultaneously decreasing working capital.
This scenario is a common problem as most organizations focus on transactional training for their users in the run-up to go live and during the critical post go-live frenzy. This initial introduction to SAP only makes sense as no company can stay afloat without the ability to create purchase orders, receive materials, create sales orders and invoices, etc. Unfortunately, after the dust has settled and the power users and consultants have long since gone, users are left bereft of the knowledge on how to leverage the powerful tools available to them in standard SAP.
Organizations are persistently under pressure to increase output with fewer resources. The only way to accomplish this mandate is to more fully utilize the systems and tools available to them, i.e. maturing in their SAP processes. Doing so requires that all users understand the tools available to them and use them correctly.
It is important to build an understanding of the activities performed by buyers and planners each day and additionally identify those processes which are being performed outside of the system. A strategy should then be developed to integrate processes within the system, especially in those cases where doing so allows SAP to handle tasks in lieu of users who could otherwise be performing value-add tasks. Lastly, users will be trained on leveraging the tools within the system to improve supply chain performance.
Benefits of Inventory Optimization
- Improved employee efficiency/effectiveness
- A decrease in inventory value and increased working capital
- Empowereresults-drivenven employees