Manufacturing Supply Chain

Building a Plan for a Stronger Supply Chain

Today, industrial manufacturers like yours struggle to find the right inventory placement across their global supply chains; one that will reduce operating costs.

Lean manufacturing initiatives may have done well to push inventory out of the plant, but may not reduce overall inventory investments. Often those inventory costs move elsewhere — to suppliers, finished goods, or in some cases, to excess logistics costs. ERP and supply chain planning implementations have been beneficial in other areas, but haven’t helped increase total inventory turns.

Further complicating matters for manufacturers are:

Complex bills of materials
The need to model and plan for slow versus fast-moving parts
Optimizing inventory targets in the presence of capacity excesses or constraints
Entrance into new markets and competition to be the best in meeting demand
Just-in-time initiatives
Increased outsourcing of parts
Multiple suppliers and variability in lead times
Shrinking product margins
… and others

How should your manufacturing company develop inventory plans which balance financial and operational constraints unique to your business?

Your Model Against Supply and Demand Uncertainties

Uncertainties, disruptions, and fluctuations in data over time can make strong decision-making challenging. How do you decide with confidence how many days (or hours) of inventory of each component or end-item should be kept at any point in the chain? How do you stabilize product availability? If you run Kanban, how do you determine and update Work-In-Process (WIP) levels? It’s costly to keep excess safety stock as a buffer, but it can be more costly to delay a shipment or miss an order. How do you plan for all this uncertainty?

You plan for uncertainty with SmartOps Enterprise Inventory Optimization (EIO) solution. EIO sets itself apart from traditional planning solutions with its comprehensive, analytical view of the global supply chain. SmartOps solutions account for inherent uncertainty — helping you determine optimal target inventory positions just when you need them. With SmartOps EIO you can:

Plan Granularly Against Supply, Production and Demand Uncertainty. Uncertainties, disruptions, variances in forecasts, lead times, and capacity over time are critical to the performance of your supply chain, but vary significantly from one item to the next. On average the plan was correct, but in reality the performance of your supply chain suffered at every single location, with slow-moving inventory in some places and stock-outs in others.

EIO’s stochastic process engine uses advanced algorithms to account for uncertainties in inventory drivers — customizing the calculations all the way down to the item, location, and time period level.
Analyze and Optimize — Even in Complex, Multistage Supply Chains. It’s never easy to keep a supply chain optimized across multiple stages on a continuous basis. Each has its own mix of raw materials, production, assembly, postponement, packaging, and inventory-planning-distribution-retail stages, but there’s significant interaction. To what degree should you postpone inventory to take advantage of risk pooling, or is it more effective to hold additional safety stock towards the final product? Companies not using SmartOps either manually set internal safety stock targets, or use an all-or-nothing to deliver 100% service levels or hold no internal safety stock. Clearly this isn’t much of an improvement from decades-old rules of thumb.

SmartOps EIO uses a multistage modeling approach that considers and calculates the relationships among your inventories, service levels, capacity, and costs — across all stocking locations and stages/echelons. This makes it easy for planners and analysts to focus on where to create the most impact.
Consider Capacity Constraints in Inventory Planning For Added Efficiency. There are a variety of capacity constraints you’re not considering today. Perhaps your plant operates with a frozen window, where production orders cannot be changed inside a certain number of weeks. With the right planning, this can help stop demand variability from propagating into raw materials. Perhaps some items can only be delivered in pallets or full trucks. Perhaps certain product lines with periods of high demand mean inventory is pre-built. Perhaps similar products in your supply chain need to be run in sequence with a minimum production run, due to production changeover costs. Traditional approaches ignore these constraints, not recognizing how they impact safety stock planning.

EIO helps you determine optimal target inventory positions. It breaks inventory down based on purpose — safety, cycle, in-transit, pre-build, and merchandising stock requirements — and understands when and how inventory can do double-duty. EIO coordinates capacity, inventory, demand, lead time, and product availability variables — making EIO the most robust inventory optimization solution on the marketplace.

Deliver to value to dealerships while controlling financing costs. Often, manufacturing companies have arms-length distribution arms or sell through independent dealerships. Dealerships are enticed by manufacturer-provided financing that encourages inventory to be pushed downstream. But once in place, slow-moving inventory can require heavy discounts to move product — eroding margins and cannibalizing sales of other models.

SmartOps EIO can determine optimal inventory targets all the way into distribution — and provide a fact-based arbitration for just how much should be on the lot. In addition to reducing financing arm costs, the lower space requirements free up dealerships to use a smaller footprint — reducing costs or enabling them to relocate to better real estate.

SmartOps Enterprise Inventory Optimization (EIO) fills a persistent gap in the supply chain planning landscape for manufacturing companies by generating improved inventory targets:

Across all components and end-items/ finished goods
For all locations
For each time period
For the reasons you might need to carry inventory (safety stock, cycle stock, pre-build inventory, in-transit/ pipeline stock, merchandising/ dealer stock)