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You probably heard it many times over: “we will reduce your inventory by 30%” (when? which inventory? why?), “we show you things in SAP you have never seen before” ( that’s great, but what is the value in that?).. “Don’t ever use an add-on. These are bad” (really? Is that a rule?); the way to better business is by Information Maturity (has there ever been a more useless slogan?) or “safety stock can lead to excess or insufficient stock(duh). We show you how to solve that problem with exception management” (oh boy! Are you trying to tell me that I should reduce variability in MD06??).

Too vague in my mind. And they’re all selling tools… which are supposed to get you sign off on an optimization project that might cost you a lot of money without getting much, or anything out of it.

I truly do believe you should constantly improve and optimize your SAP supply chain but beware of the Sharlatans and “thought leading” experts who do a good talk but never show up when the rubber hits the road.

Here are the first four of ten bits, I think you should watch out for when the people who halfheartedly reveal all the opportunities and promise ongoing value, show up at your door knocking.

First: “only the very best advisors will do!” Most SAP consultants get away with not knowing much during the implementation. As long as they know a little bit more than the user (who, at that time usually knows only little or nothing about SAP), they look credible and knowledgeable. But once your buyers and planners were exposed to the workings of the system for years and are experiencing severe pain and developed their own work-arounds – it will take a very, very experienced and solution oriented consultant who is a top notch communicator to get your team back on track.

Be very careful and get to know the people who will perform the actual work with your team and don’t let the consulting company fool you with their best few during the assessment. Very often the consulting company comes in with a “thought leader” who speaks big words and does his ‘Spiel’, only to leave you with a team that is inexperienced and overwhelmed with the task at hand. It also does not take a horde of consultants to do the job right. If they give you one for Purchasing and another one for Forecasting, you know that they don’t have a view of the big picture. And in an SAP supply chain optimization you can’t work in silos.

Second: “30% inventory reduction is not always a good thing”. If they come in, telling you that you will recoup the investment in the project with an inventory reduction, ask them what inventory they talk about. Finished Goods? so that we can’t ship or sell? Raw materials? So that we can’t start production? WIP? So our production lines starve?

A blind reduction of inventories (and it is a blind suggestion because the consultancy can not possibly know your situation at that point in time) can backfire in the most devastating way. In supply chain optimization, it’s all about having the right product in the right quantity at the right time in the right place. And that sometimes requires an increase of inventory.

Flow benchmarking in Factory Physics is a great way (one way out of several others) to determine the appropriate level of inventories (either as a total or broken down into finished goods, WIP and raw materials) but how many SAP consultants can tell you how that works?

Third: “Don’t ever pay for an assessment!” One of the greatest scams ever is when you have to pay for someone figuring out how best they can position themselves to define a long term project with you.

If they want to see how they can help, let them take a look. If they come up with a convincable, sensable proposal then go for it. But how do you know that they are able to do that? And why would you take that risk? Let them come in and show you what they will do for you. As crazy as it sounds; i have seen SAP Optimizers who actually don’t care what’s in it for the customer but rather what’s in it for them. No kidding. They actually think that’s how it works. Must be a cultural thing!? If they recommend the book “who moved my cheese”, you know that you are dealing with people who would be really good running a Kindergarden rather than optimizing your supply chain (but they might be funny and entertaining on the project).

Fourth: “a policy is a policy is a policy” In my personal opinion a supply chain optimization can only work when your buyers, schedulers and planners fully understand how to continuously and sustainably adjust the settings that drive optimized inventory levels and effective, automated strategies. A policy is what helps your user to do that. Your consultant should know what a policy is (at the least) and know how to set it up.

If your optimization partner uses some LIS transactions and key figures to show you what could be wrong, they give you a one-time fix and not a strategy for continuous improvement. Knowing that a certain item has a high dead stock is interesting, but how does that help you? They give you a “top ten hitlist of high dead stock items” and tell you to reduce the inventory. That’s not an optimization. That’s “hitlisting”!

So how do I get the dead stock down? And how can I avoid build-up of dead stock on other items? …in an automated fashion without having to go through every item manually?

The answer is segmentation, classification and policy setting. If they pitch an inventory reduction and don’t ever talk about policies… watch out!

The entire SAP supply chain is driven by policies which optimize and automate. A good consultant knows that and can utilize and convey their principles so that your users apply them effectively. A bad one gives you “Top Tens” and “One Time Fixes”

…  more in the next blog

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2 Comments

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  1. Vivek Seelin

    Nice blog, this is a subject on which am doing my extensive research on.

    As you say it is indeed important to have a policy. But the parts which go into formulation of that policy is what defines whether business just see MD06 as an exception report or an exceptional report which provides some hidden insight into their material planning processes.

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    1. Uwe Goehring Post author

      Dear Vivek

      I agree with you wholeheartedly. MD06 can provide exceptional information that is etremely useful to manage a supply chain. What I meant with my comment about MD06, is that I see some advisers mis-interpretating what MD06 does (e.g. as in that quoted remark about safety stock). If used appropriately, MD06 is one of the best tools in ERP.

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