1Considerinventoryoptimizationtools

Inventoryoptimizationtoolshavebeengaininggroundascompaniesseektoevaluatetheirentire
networkanddeterminethebestinventorypoliciesforeachproductateachnodeintheirsupplychain.
ThesearetypicallystandalonesoftwaretoolsthatusedatafromWMSandERPsystems.
Theseoptimizationtoolstakeintoaccountdemandvariability,supplyvariability,andreplenishment
parameterstodeterminehowmuchinventorytoholdinordertoguardagainstthatvariability,says
DaveWheeler,principalofsupplychainservicesforconsultingfirmSt.Onge.
AmanSapra,seniorprojectmanagerofinventoryandsupplychainstrategyatSt.Onge,attributesthe
increasingpopularityofthesetoolstotherealizationbymorecompaniesthatthetransactionalsystems
runningtheirDCsdonotprovideenoughcuttingedgeoptimizationcapabilities.
However,Sapracautionsagainstoptimizationtoolsthataresimplygreatanalysis,smartmath
monsters.
Youwantsomethingthatwhentheresultscomeout,andwithminimalhumanintervention,itcan
executeonthoseresults.Itmayseekapprovalforafewitems,butwillworkseamlesslywithbusiness
systemsonmostrecommendations.
2Employbusinesssolutionsthatuserealtimeanalyticsunderoneplatform
AccordingtoMichaelWohlwend,vicepresidentofSAPAmericasandthisyearsvicepresidentofthe
WarehousingEducationandResearchCouncil,thedaysofmanaginginventoryusingExcel
spreadsheetsarepass.
Powerfulsalesandoperationsplanningsolutionsarenowusingrealtimeanalyticsthattakeaunified
datamodelofdemand,supplychain,andfinancialdata,analyzethematanylevelofgranularity,and
instantlyprovideresponses.Youcanevenperformrapid,interactivescenarioplanningandsimulation
withthisdatatosupportinventoryandotherplanningdecisions,saysWohlwend.
Operatingononeplatformwheredataissharediskey,saysJenniferSherman,seniordirectorfor
fulfillmentapplicationsstrategyforOracle.Youhaveonepictureofinventory,onepictureofcosts,
andoneplatformtoplanagainst.Thisallowsyoutohaverealtimeinventorywithinthatonemodel
andeventrackwhoownsthatinventoryevenifIvegotaproductthathasbeenconsignedtome
frommysupplier,itsstillinthesameinventorymodel.
Withallofthesesystemsprovidinguserssomuchrealtimeinformationattheirfingertips,managers
cancapitalizeonuniqueopportunitiesformovinginventory,suchascompletelybypassingtheDC.
ChrisJones,externalvicepresidentmarketingandservicesforDescartes,explainsthatcompaniescan
nowtreatoceancarriersasmobilewarehouses,allocatinginventorybeforeitevengetstotheport.
Fromtheport,ittypicallygoestoadeconsolidatorwhothensendsittotheDC,whothendecidesto
senditfromtheretoaretailstore.Thelatestsoftwarecutsoutonebigstepfromtheprocess,says
Jones.So,becauseyouknowwhatscomingandyouhaveitlabeledwithaccurateelectronic
information,whenitgetstothedeconsolidatoryoucanprocessittogodirectlytotheretailstore.
3DonttreatallSKUsthesame
Thereisnosuchthingasaonesizefitsallsolution.Eachandeveryproductdoesnothavethesame
supplyanddemandvariabilitypattern,saysSapra.Focusonthose20%thatstatisticallymakeup
80%ofthevolumeandmanagethatinventoryreallywell,soyoumaximizesalesandprofits.
Somecompanieswillnotonlyplanforitemsdifferently,buttheymightalsohavedifferenttargeted
fillratesforeachitemcategory,explainsWheeler.MyfastmovingAitemsshouldbefilledatarate
of99%,Bitemsat98%,andCitemsat95%.Itscalledserviceleveldifferentiation.Thegoal,he

adds,istomaximizeresourcesonthemoreprofitableAproducts,whileminimizingtheresourcesused
onthelessprofitableCitems.Eachsegmentwillthenhavedifferentforecastingandstockingpolicies.
4Keepaneyeonyoursuppliers
Therearesuppliersthatdontnecessarilysticktotheirscheduleordeliverontheircommitments.Its
notonlyintermsoftiming,butalsofillrate,saysWheeler.Ifyouordered1,000casesofpencilsand
theordershowsupatthedoorwithonly900,thenthatsaproblem.
Ourexpertssuggestcloselymonitoringsupplieractivity.Mostsystemstracktheinboundreceiptofan
item:Thereisapromisedate,anactualreceiptdate,quantityordered,quantityreceived,andthe
conditioninwhichitwasreceived.Thesearemetricsthatcanbetrackedandanalyzedtodeterminea
suppliersreliability.AllofthatdataistypicallyavailableinaWMS,saysSapra,buthasanybody
reallylookedatittodetermineunreliablesuppliers?
Afteridentifyingunreliablesuppliers,youcandealwiththemandresolveanyissuesandworktoward
improvingasuppliersperformanceorholdmoreoftheirinventorytoguardagainsttheirvariability.
5Trackessentialattributes
Overthepastfewyears,trackingproductgenealogyandtraceabilityareatthetopofinventory
managersmusthavelists.
Itsnotenoughtojusttrackyourlotnumber,saysCurtSardeson,managingprincipaloftheOpen
SkyGroup,aconsultingfirmspecializinginsupplychainmanagementsolutions.Ifyouused
subcomponentsandsubassembliesthatyoumixintoyourproduct,youalsoneedtoknowthoselot
numbersincaseyourproducthasarecall.
Thekeyishowtoefficientlycapturetheseattributeswithoutincreasinglabororhandlingcosts.
Sardesonrecommendselectronicallycapturingdatasuchascountryoforigin(COO),serialnumbers,
andvendorlotnumberthenautomaticallysendingthatinformationviaEDI/ASNtothenextnodeon
thesupplychain.Withoutit,manualintervention,spaceutilization,andlaborcangetoutofcontrol
quickly.
Theincreasedtrackingalsoaffordstradingpartnerswithincreasedvisibilityandtheabilitytomake
moretimelydecisions.
6Leveragemobiledevices
Mobiletechnologiesandmobileuserinterfacesarenowubiquitousforcapturingdataoninventory.
Itstimeforevenbusinessesthatdontseethemselvesascomplextodemandmobilitysolutionsfor
accuracy,saysOraclesSherman.
SAPsWohlwendpointsouthowmostsalesassociatesonthestorefloornowhavemobiledevices
withrealtimeinventoryofthestore.Notonlyaretheyabletoimprovecustomerservice,butwhen
inventoryislow,theyreabletogenerateareplenishmentfromtheDCdowntothestore.
Mobiledevicesallowquickaccesstoaccurateinformationanddatasothatmanagerscanactquickly
ontheirinventorydecisions,especiallyintheDC.Italsoeliminatestheerrorsanddelaysassociated
withapaperbasedoperation,improvingaccuracy,efficiency,andthegeneralspeedofyourbusiness.
7Besmartaboutyourslowmovingandobsoleteitems
Whileitmakessensetofocusonyourmoreprofitablefastmovers,youcantignoreyourslower
movingmerchandise.Everydaythattheseitemsarenotusedorsold,theyoccupyspace,utilizelabor
andresources,runtheriskofobsolescence,andinmanycasesactuallygetinthewayofyourmore
popularitems.
Itbegsthequestion:DoIevenneedtheseslowmoversinallofmywarehouses?saysSapra.

ThemoreDCsthatyoustoreanitemin,themoreinventoryyouregoingtohave,saysWheeler.If
youpullthatinventorybackintoasingleDC,youreabletoaggregateyourdemandvariability,which
allowsyoutoreduceyourrequiredsafetystock.
Itdoesntmatterwhereyouputslowmovers;manyDCswillneedtodealwiththem.Controlyour
SLOBslowmovingandobsoleteitems,addsSapra.Theseareproductsthateveryoneconveniently
forgetsabout.Wellmanagedoperationsaregoingtoputitonsaleorsendittothriftchannelsandoff
priceretailers.
8Lastly,dontneglectslotting
Properslottingnotonlydeliversmuchneededspace,butappropriatelylocatesthefastestmovingitems
closertodocksandmoreaccessiblelocations,minimizingtraveldistanceandmaximizingoverall
throughputandproductivity.Unfortunatelymanycompaniestendtoneglecttheirslotting.
Inthebestcompanies,slottingisadailyactivitynotaquarterlyorannualactivity,saysOpenSkys
Sardeson.Asadailyactivity,youcanstayontopofitbecauseitsonlyalittlebitofworkand
completelymanageable.Ifyouslotannuallyitbecomesamajorundertaking.
St.OngesWheeleralsosuggestsinvestigatingiftwoitemshaveahighprobabilityofbeingorderedon
thesameorder.Ifso,youwantthemclosetoeachotherinthepickingareasothatyourtraveldistance
isminimized,reducingyourlaborcosts.