i2 u intelligent supply chain management course module seven: inventory planning
TRANSCRIPT
i2 UIntelligent Supply Chain Management
Course
Module Seven:Module Seven:Inventory PlanningInventory Planning
2© 2001 i2 Technologies Inc CONFIDENTIAL
Supply Chain Management Key Processes
Sales & Operations Planning
Demand Planning
Inventory Planning
Supplier Scheduling
Production Scheduling
Inventory Deployment
Transportation Scheduling
Demand Fulfillment
Supply Chain Execution Monitoring
Strategic Supply Chain
Planning
Master Supply Planning
Procurement
Production Distribution
Transportation
Impact of decisions
_
+
Num
ber o
f dec
isio
ns
+
_
Spec
ifici
ties
by in
dust
ries Length of Planning horizon
Fu
lly
Inte
gra
ted
to
p-d
ow
n d
irec
tio
ns
Fu
lly
Inte
gra
ted
bo
tto
m-u
p f
eed
bac
k
Reaction to changing supply conditions
3© 2001 i2 Technologies Inc CONFIDENTIAL
After Completing This Module,You are Expected to:
Understand the key business objectives of the Inventory Planning process
Understand the logic of a safety stock calculation
Understand the specifics of service parts planning
Identify Inventory Planning key enablers and their resulting business value
Identify Inventory Planning excellence criteria
4© 2001 i2 Technologies Inc CONFIDENTIAL
Inventory Planning Process Positioning
hou
rs
days
wee
ks
mon
ths
year
+
buy
make
move
sell
store
operational tactical strategicscheduling
5© 2001 i2 Technologies Inc CONFIDENTIAL
Empirical calculation of safety stocks, generating either excess inventories or customer service issues
Safety stock recalculation periodicity too infrequent
Lack of consideration of risks of inventory obsolescence and price erosion when defining inventory targets
Lack of consideration of phase in and phase out of products
Typical Deficiencies of the Inventory Planning Process
6© 2001 i2 Technologies Inc CONFIDENTIAL
‘Scientific’ Calculation of Safety Stocks
Safety Stock calculation based on : – demand variability (forecast accuracy)
– supply variability (schedule adherence)
– desired level of customer service
Inventory Planning Improvement is Generally a Low Hanging Fruit
© 2001 i2 Technologies Inc CONFIDENTIAL
Inventory Carrying Costs
Service
Level
100
94
98With the current level of
Demand and Supply variability, a targeted increase
of 4% in on-time delivery would mean more than doubling the
inventory investment
Inventory Planning:Exchange Curve Analysis
9© 2001 i2 Technologies Inc CONFIDENTIAL
Inventory Planning Process Key Enablers and Related Business Benefits
Safety stock levels calculated as a function of supply chain uncertainties and customer service objectives
Real time simulations capabilities on exchange curves
Customer service
Inventory turns
10© 2001 i2 Technologies Inc CONFIDENTIAL
Roadblocks to Remove to Implement an Optimized Inventory Planning Process
Lack of cleanliness of historical data
Lack of availability of historical data
11© 2001 i2 Technologies Inc CONFIDENTIAL
Service Part Planning
Inventory Planning for
Spare and Service parts
12© 2001 i2 Technologies Inc CONFIDENTIAL
Industries Where Service Parts are aCritical Element of Business Performance
Hardware + PC manufacturing
Network equipment
Aerospace & Defense
Automotive + 1st Tier suppliers
Industrial products / heavy equipment
Medical equipment
13© 2001 i2 Technologies Inc CONFIDENTIAL
Service Parts Planning is Influenced by Specific Factors
Defined Market Size = Installed Base
Service Contract Obligations (penalties)
Strong impact on customer retention
Returns & Repairs Chain (Reverse logistics), which influences parts availability
Life Cycle Factors
Items with low demand / highly erratic demand
14© 2001 i2 Technologies Inc CONFIDENTIAL
Parameters Considered to Calculate the Safety Stock Policy for Service Parts
Desired service level Usage Demand Forecast deviation Carrying costs Returns Production Lead Time Units in repair Substitute and superceded parts Part effect on uptime Random spike demand analysis
15© 2001 i2 Technologies Inc CONFIDENTIAL
Inventory Planning Excellence Criteria
Safety stocks levels are calculated as a function of the desired customer service level (off the shelf product availability rate), as well as demand and supply variability, by using an adequate algorithm
Reporting capabilities enable the planner to identify major deviations between the previous and the new safety stock value calculated by the system
Input data quality is tightly monitored. Root causes for poor quality are analyzed and lead to adequate corrective actions
The planner has the ability to modify a safety stock value before it is used to regenerate a master plan
Safety stock calculation frequency supports business dynamics
Real time what-if simulations (using memory resident calculation for maximum speed) are extensively used in order to evaluate the financial impact of modified customer service objectives on inventory carrying costs (exchange curve analysis)