Steps to success for building inventory management and optimization strategies

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Key Takeaways

⇨ Organizations are recognizing the significance of supply chain visibility and the need for improved management and optimization to mitigate inventory-related risks and difficulties.

⇨ Although inventory planning and optimization tools and technologies have advanced considerably in computing power and features, the fundamental approaches and algorithms have remained relatively unchanged for many years.

⇨ To build best-of-breed inventory management and optimization capabilities, it is crucial to develop a comprehensive inventory strategy that aligns with the corporate strategy.

Building effective inventory management and optimization strategies

SAPinsider’s benchmark report on Inventory Management and Optimization focuses on how organizations are recognizing the significance of supply chain visibility and the need for improved management and optimization to mitigate inventory-related risks and difficulties.

According to the report findings, the key challenges that organizations face are the lack of:

  • clearly defined inventory strategy and policy
  • internal skillset for implementation
  • strategy on transitioning from solutions like APO
  • knowledge on the latest tools available

Additionally, the report also revealed several other trends regarding process automation.

  • Lack of integration, lack of actionable insights, and fragmentation & silos of inventory data feature among the top pain points.
  • Inventory Accuracy is the top KPI which highlights that inventory visibility is foundational for robust inventory management expertise.
  • Organizations are focused on tools and technologies that help them build end-to-end inventory visibility. ERP-based inventory management tops the current state technologies list followed by barcoding and labeling that are being paired with other technologies to help create real-time inventory tracking capabilities.

The findings also reveal that organizations are taking a phased approach toward building inventory management and optimization capabilities, while simultaneously addressing the key challenges associated with their current inventory management tools. Organizations are investing in inventory visibility technologies, inventory data quality management, and data integration. With organizations still grappling with demand volatility caused by the pandemic, there is a growing need for developing inventory policies. It is no surprise that organizations continue to prioritize inventory management and optimization. SAPinsider’s research has further confirmed this trend and provided valuable insights into why these capabilities are becoming increasingly important. Organizations can adopt the following actions around inventory management and optimization strategies:

Develop a comprehensive inventory strategy that aligns with the corporate strategy: To build best-of-breed inventory management and optimization capabilities, it is crucial to develop a comprehensive inventory strategy that aligns with the corporate strategy. Frameworks like the Strategy Operations continuum created by the MIT center for logistics can be used for this.

Consider omnichannel. The rapid emergence of omnichannel has complicated the already complex landscape of inventory planning and management. When developing inventory strategy, organizations must consider omnichannel’s impact.

Explore evolving conventional planning approaches. Although inventory planning and optimization tools and technologies have advanced considerably in computing power and features, the fundamental approaches and algorithms have remained relatively unchanged for many years. For organizations with sufficient resources, current tools and technologies offer numerous possibilities for developing customized heuristics to address unique inventory management challenges.

Build process hubs that are integrated with supply chain control towers. To achieve best-in-class processes, it is essential to adopt continuous improvement approaches such as DMAIC in Six Sigma, measure the immediate impact of automation, and monitor automated processes. Process hubs are becoming increasingly vital for organizations and should be located within a supply chain control tower.

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