Retail / Distribution Supply Chain

Caught in the middle of demand and supply variability, distribution inventory is often the only buffer to maintain high service levels while minimizing logistics costs.

SmartOps recognizes that distribution poses a unique set of challenges: high customer service levels are needed not only to ensure a positive brand image, but also to avoid stock-outs which often translate directly to lost sales in the short term and market share erosion in the medium/long term. High service is easily achieved through excess inventory, at a high cost: the expense of higher working capital, storage space, and the operational expense of writing down aged/obsolete inventory when it doesn’t move. High service is less easily addressed with minimal inventory, though at an even higher cost: expedited shipping will often save the order if not the margins.

Addressing inventory planning for distribution is difficult, because there is a natural limit to the accuracy of a forecast at the level your supply chain executes: SKU/location, often on a weekly basis. How should this planning vary based on forecast error, bias, seasonality, and intermittent demand? To what degree is your supply chain able to take advantage of risk pooling? How should lead time variability be measured and considered? Can batch requirements such as full pallet or full truck reduce the need for safety stock? Your ability to respond to demand today may be based on decisions you made weeks or even months ago — so how should you plan?

SmartOps Enterprise Inventory Optimization (EIO) delivers a new, more analytical way for distribution companies to determine how much inventory they should carry, given dynamic demand patterns and supplier uncertainties. Rather than relying on rules-of-thumb experience or more safety stock, SmartOps software solutions let planners optimize inventory targets while accounting for inherent uncertainties in the data and total costs associated with different customer service levels.

A Powerful System to Keep Customers and Investors Satisfied

You need a more comprehensive, analytical view of your global supply chain. You need a tool that determines the optimal plan for each item in your inventory, over time — automatically. You need SmartOps.

SmartOps EIO lets you calculate and understand how much inventory you should carry, why, where and when. With SmartOps EIO you will:

Tackle Uncertainty in Your Inventory Planning. When it comes to demand planning, distribution and retail businesses face uncertainty. Your forecasts may be correct when averaged across SKUs, locations, and time periods, but is that how your supply chain operates? If you have instant replenishment, small errors can be quickly corrected without expediting shipments. But most companies can only profitably replenish inventory periodically, and must execute based on decisions made weeks or months ago or pay a penalty to move inventory that was out of place. Other solutions use “average” or “worst-case” approaches to account for variability, hiding risk or over-buffering inventory. Without SmartOps, companies don’t know where inventory is really needed.

You need a solution to measure and account for the uncertainty of demand and supply. That’s why SmartOps’ optimization algorithms were designed to detect, calculate and manage data uncertainties.

Consider Capacity Constraints in Inventory Planning For Added Efficiency. There are a variety of capacity constraints you’re not considering today. 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. Traditional approaches ignore batch sizing, not recognizing that some of the batch can do double-duty as safety stock.

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.
Take it up a Notch with Balanced Customer Service Levels. Distribution and retail companies are often measured and compensated using very explicit customer service targets. In the past, service level targets have been set across the board, holding all SKUs to the same target. But isn’t it “cheaper” to deliver higher service with items with lower demand variability? And how should volume, value, and margin play a role?

Leading retail companies are using SmartOps to balance customer service levels, setting high targets at “cheap” SKUs and lower targets at the more “expensive” ones. They deliver a blended service level that exceeds customer requirements, and use significantly less working capital than setting the same targets across the board. These service level optimizations are blended with their enterprise inventory Planning to deliver even better financial and operational results from their supply chains.

SmartOps Enterprise Inventory Optimization (EIO) fills a persistent gap in the supply chain planning landscape for CPG companies. It generates improved inventory targets into existing business processes:

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)