Inventory Planning
What is Inventory Planning? Inventory optimization has gained in importance since the economic crisis, which intensified the pressure on working capital, and a healthy cash flow is increasingly seen as a way to maximize profitability. A solid approach to inventory planning is advisable because blindly cutting inventory could have a severe impact on the service
What is Inventory Planning?
Inventory optimization has gained in importance since the economic crisis, which intensified the pressure on working capital, and a healthy cash flow is increasingly seen as a way to maximize profitability.
A solid approach to inventory planning is advisable because blindly cutting inventory could have a severe impact on the service level, resulting in higher operational costs in an attempt to solve service issues. It’s important to keep the three dimensions of the supply chain triangle – service, cost, and cash – in balance.
There are several reasons to temporarily hold more or less inventory, e.g. to level the production or in the case of seasonal inventory. Getting a grip on your inventory requires you to plan for the inventory peaks and troughs using scenario management to show the effects on your cash flow.
Stay in control
So how can you reduce your stock in practice, while keeping the inventory drivers under control? Start with your inventory policies. Think for example of clearly defining when to opt for MTS/MTO, stock/non-stock, centralized/decentralized stock or push/pull reordering.
The inventory policy then becomes input for defining the right inventory parameters, for both single-echelon and multi-echelon inventory optimization. The parameters provide input into a planning process.
Lastly, inventory monitoring is an absolute must to be able to optimize the inventory planning process and write off slow-moving and obsolete inventory.
The Results of Good Inventory Planning:
Customer Service Level
Imagine what you could do with 50% of your working capital in cash. Would you use it to improve your customer service or to create a broader product portfolio so that you can respond even better to your customer’s wishes?
Inventory
Since the capital employed consists of your fixed assets and your working capital, reducing the inventory via multi-echelon inventory planning in your supply chain and across company boundaries has a significant impact.
Working Capital Requirement
A single, central view of your inventory level helps you to gain the necessary deep insights to make business decisions at a global level that further drive the company’s growth.
It is important to keep the three dimensions of the supply chain triangle – service, cash and cost – in balance.
On demand webinar
In this webinar Prof. Dr. Bram Desmet, Managing Director of Solventure will talk about “Inventory Planning & Optimization as an essential part of your S&OP process”.
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Inventory Planning