Keys to supply chain inventory optimization
As we work toward Hub 2018, I’m very excited about the direction that Anaplan is going with regard to connected planning. Supply chain is an area of focus for Deloitte and, by nature, it must be a very connected process. I’ve seen a number of examples of how a connected supply chain can lead to much better outcomes for our clients and their businesses’ bottom lines. My colleague Jason Makins (a Master Anaplanner) and I collected insights and advice for connecting supply chain and finance around inventory optimization that I’m excited to share.
Key supply chain factors across all industries
The business of supply chain is evolving as technology enables capabilities that were on wish lists a few years ago. The supply chain connects fully automated manufacturing blockchain applications tested to track shipping and freight, and dark warehouses like Amazon, where products stored and offered belong to countless different businesses and same-day delivery is demanded by the simplest of customers.
As the supply chain becomes increasingly complex, businesses must adapt and feel comfortable operating in a state of imbalance. Competitors race to stay ahead in a game of shrinking percentages as each part of the supply chain is squeezed, outsourced, or re-invented.
When focusing specifically on inventory and its importance to the end customer, a question arises: What key factors are influencing business choices of where, when, and how much across all industries?
Inventory sits as a pivot point that can act as a buffer between the business and the customer, and is a key factor in customer acquisition and retention. Three other key factors to address include:
- Speed. It’s imperative for businesses to keep upping the pace to stay competitive. For example, customers are driving expectations for same-day deliveries, so businesses are feeling pressured to keep everything in stock. This, in turn, creates tremendous pressure to optimize the supply chain.
- Costs. The costs of logistics and holding items are continually challenging factors, along with the increasing use of disruptive technologies like robotics and drones in the supply chain. All of these add new costs to contend with in an already competitive marketplace.
- Risks. In a perfect world, suppliers simply meet consumers’ demands. But reality isn’t usually that simple. Instead, organizations must place a significant focus on risk and the ways that inventories and stock rotation impact their balance sheet. The need to hold inventory is not only to meet demand, but also to keep business operations running.
Common challenges for inventory optimization in supply chains
The supply chain is a connected process, with each link in the chain impacting the others
As the pivot point between supply and demand, inventory management is one area of the supply chain where multi-million-dollar benefits can be delivered quickly. But before businesses can reap those benefits, they often face—and must surmount—common challenges:
- Appropriate inventory KPIs are needed to drive desired inventory management practices
- Inventory that is not segmented by contribution margin and demand volatility can lead to too-high safety stock and replenishment levels
- Inventory management isolated from account-level demand and promotional planning can adversely impact inventory holdings and long-term costs
- Many companies have significant volumes of inventory data, but require complex analysis to review inventory levels and identify trends in inventory use to establish a baseline for optimizing replenishment levels
Finding answers, making decisions
To meet these challenges, it’s important to focus on the cost to serve across product, channel, material, and service. Look at how inventory fits into the end-to-end sales and operations planning (S&OP) process—which is about balancing the demand and supply sides and reviewing slow-moving and obsolete stock. That is how you can find quick wins: areas where you can free up stock, and then proactively manage slow stock, making decisions over time whether to keep it or not.
Then, connect all the pieces together in a supply center of excellence within your organization that you’ve staffed with highly trained people and processes. Now you are equipped to have the right conversations to make the right decisions moving forward.
Moving ahead with Anaplan
With the Anaplan platform and Deloitte’s expertise in inventory management, you can gain an accurate view of your business, enabling better SKU rationalization and business strategy alignment. Meaningful improvements to SKU management, target stock levels, product segmentation, and a truly collaborative S&OP process can only be achieved with real-time data and transparency. The technology is cloud-based and automatically refreshes from your source system, so you can track how you’re performing month by month or day by day. Anaplan is a true platform, which means your people can easily work collaboratively across the entire end-to-end supply chain planning process. Everyone can drill down into very large and complex data sets, make better-informed decisions quickly, and stay a step ahead in an increasingly competitive marketplace.
For more details on how to gain inventory optimization and supply chain momentum, check out the webinar Jason and I presented. To get even more information on how you can better connect supply chain planning to profitability, read the Anaplan white paper, “Connecting supply chain planning to profitability.”
Connecting supply chain and finance around inventory optimization