Squeezing Inventory to Extract Value in an OEM Service Parts Environment

Squeezing Inventory to Extract Value in an OEM Service Parts Environment

Reading time: 17 mins

Barloworld Equipment Southern Africa used SAP Advanced Planning & Optimization to manage 2.1 million stock keeping units across 46 plants and six southern African countries. By optimizing its inventory, it cut emergency supply fees by 20 percent and improved the overall availability of off-the-shelf inventory by 3.8%.

Key Concept

Inventory planning determines the quantity of stock in a warehouse location. For multiple warehouses, inventory planning can require an innovative and different approach.

Up to 2008, the Barloworld Equipment team in Johannesburg, South Africa, tackled the challenge of implementing SAP Advanced Planning & Optimization 4.0 to suit its original equipment manufacturer (OEM) service parts environment. Its aim was to manage the fine balance between overstock and having the right inventory of spare parts at the right time.

The challenge of planning inventory for an OEM dealer’s service parts lies in its uniqueness. Some service parts are fast moving, but most are slow and difficult to manage and plan. Our goal is to constantly challenge the question of what to stock and then make sure we can provide a high level of inventory availability across our supply chain network.

We implemented SAP APO 3.0 in 2002, making use of global Available-to-Promise (global ATP). In 2005, we upgraded to SAP APO 4.0 and extended the functionality to Demand Planning (DP) and Supply Network Planning (SNP).

In 2008, we upgraded to SAP SCM 5.1. I’ll share with you how we navigated through the following key areas of the DP and SNP project:

  • Project approach
  • Managing inventory policy for fast movers
  • Dynamically manipulating a material’s source
  • Avoid overspending – especially on slow-moving materials

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