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SCM 2013 Prague Presentation Tip – Inventory Optimization

Later this month, I’ll be delivering a session at the Logistics & SCM, PLM, Manufacturing, and Procurement 2013 event,
April 24-26 in Prague,  titled” Stuck with Too Much Inventory? How to
Leverage Advanced Planning Solutions to Streamline Product Transitions

I was selected to present this topic as inventory optimization is a big
priority for many companies. But even if proper inventory levels are set, there
is no guarantee that obsolete inventory will be avoided at the end-of-product
life cycles
. Some of the big fundamental drivers of
excess and obsolete inventory include:

  1. Customers do not buy as
    much as they forecast or order
  2. Sales introduces new
    items that do not sell to forecast
  3. Procurement in large lots
    to take advantage of quantity price breaks or production efficiency gain

During my session, I’ll demonstrate
how to make use of standard APO function and several enhancements to drive
processes in SAP APO DP, SNP, and PP/DS that will help companies manage
end-of-product life cycles better. Here’s a sneak peek at just one of the
techniques: Life cycle modeling in SAP APO Demand Planning through realignment:

  • Realignment can be
    used to copy from one set of Characteristic Value Combinations (CVCs) to a new
    combination or to move one set of CVCs to another combination
  • It can replace the
    target CVCs or add to the target
  • It can delete the
    source or leave the source
  • Common uses
    1. Model new product
      • Copy from one set of CVCs
        to another to model and leave the source CVCs intact
  1. Model the immediate
    replacement of one product to another
    • Add the source product to
      the target product
    • Delete the source product
  2. Model the change of
    behavior for one product to another
    • Overwrite the target
      product with source product
    • Source product may remain
      or be deleted depending on desired effect
    • Advantages
      1. Realignment affects all
        key figures which is useful for any judgmental forecasts
    • Disadvantages
      1. Must be manually rerun if
        there are continuing effects
      2. For example, if sales
        continue to be taken on the discontinued part until inventory is used up, then
        the realignment will need to be run every time new history is loaded to the
        planning area
      3. Very memory intensive and
        slow for large sets of CVCs
      4. Not time phased (e.g.,
        can’t be used to like model after a certain date)

For more on SAP APO- join me April 24-26 in Prague at Logistics & SCM, PLM, Manufacturing, and Procurement 2013. Also make sure to get the latest event updates by following #SCM2013 on Twitter.

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