Inventory Optimization and Multi Echelon
Inventory optimization and multi echelon planning are ideas whose time have come. They offer dramatically more logical ways to understand and manage the supply chain, and offer more opportunities to integrate sales and operations than S&OP. However, the first step will be getting people to understand what these terms mean for supply chain improvement.
Misunderstood Terms
These are two of the most misunderstood terms on supply chain IT projects. No SAP product has either of these capabilities, and the different vendors that do offer the capability solve these problems in different ways.
Below is an example of how contract based inventory optimization works. I believe that inventory optimization or “service level planning” will grow significantly in the future. It may be the most logical way to plan and manage the supply chain as it ties operational costs directly to customer preferences.
Inventory Optimization
Multi-echelon Planning
The term multi echelon is used by many vendors, but few can manage the supply chain in a multi echelon way. In order to successfully pull off multi echelon planning, the software must have the capability to manage “effective lead time,” which is described in the graphic below.
This classification of software is greatly under-implemented at companies and it is a great interest of ours. We have both implemented these systems and integrated them with SAP ERP, so I can bring a blended integration solution to your company, and additionally.
Very few consulting companies understand inventory optimization and multi echelon. This is why they see most the software vendors as so similar, because they don’t understand the distinction between different software designs. They will also often recommend software based upon a pre-existing relationship over what is best for their client’s needs.
Our approach is extremely different from most other consulting firms you have worked with. If you are tired of the same old results and ready for better ones contact us.
References and Further Information
I have explanations of inventory optimization and mult-echelon planning at my inventory optimization and multi-echelon blog.
http://www.scmfocus.com/inventoryoptimizationmultiechelon/2009/11/10/where-service-level-is-set/
