Category: BLOG

By Dyci Sfregola | Business Planning Consultant

Arguably, one of the most important functions of supply chain management is effective inventory management and control. When managed correctly, inventory can be considered an investment, resulting in a significant improvement on ROI. Organizations with mature, well-defined inventory management policies recognize that inventory management is a collaborative activity executed across several roles and business units, including purchasing, manufacturing, finance, and sales and marketing, with the ultimate goal of having adequate material where needed at a low inventory cost, effectively balancing the cost of production with the cost of inventory, and maintaining sufficient inventory to meet customer expectations. Once the proper data, people and processes are in place, organizations can evaluate the technology needed to support strategic decision making.

With experience of Anaplan implementation as a software solution for inventory management, we’ve come up with a few considerations and best practices for inventory management and control as it relates to software implementations.

Establish an Inventory Management Policy

In order to realize Anaplan’s full capabilities and value, the business processes and rules that drive the modeling and math for inventory planning must be properly developed and documented. An inventory policy should address both broad (e.g. centralized vs. decentralized inventory planning, communication frequency and warehouse geographic locations) and specific inventory management decisions (e.g. make vs. buy decisions for specific items and rules for order quantities, timing and exception management).

More generally speaking, inventory policies that should specify:

• When to order inventory
• How to determine order size
• Relative importance of each inventory item (usually achieved with ABC classification or inventory segmentation)
• Inventory control procedures for individual items or product families

Inventory policies should be influenced by and created with the following factors in mind:

• Customer demand
• Planning horizons
• Lead times including production and transit lead times
• Costs associated with inventory like purchase and transportation costs as well as any applicable holding costs
• Customer service requirements to help determine safety stock levels by item, segment, location as needed

Weighing these factors will help to create an effective inventory management policy that can inform Anaplan inventory calculations, suggestions and reporting based on required safety stock levels and order system policies (e.g. lot-for-lot vs. economic order quantity (EOQ) vs. fixed order quantity (FOQ) and order point system vs. time-phased order point system vs. demand driven MRP system).

Connect and Collaborate

The necessity for visibility and collaboration across the supply chain network cannot be overstated when it comes to inventory management. In today’s horizontal supply chains, inventory processing and control often extend beyond the enterprise. Inventory will either feed into production, be a result of production, or both, so planners, master planners, and production schedulers must coordinate with each other at each level of production planning. Furthermore, inventory management is necessary at retail locations and warehouses and distribution centers, which can be owned by the organization or outsourced to 3PL partners. Supply chains must also manage and control in-transit inventory, raw material and work-in-progress inventory being held and produced at suppliers. With all of these moving pieces and data points, it is critical to have a technology solution like Anaplan that supports connected planning across the entire network, including external partner data and inputs, in order to truly realize the benefits of proper inventory management and control.

Monitor and Measure

There are two KPI categories that should be consistently monitored when it comes to inventory management:

1. Inventory costs, which can be related to holding, ordering, and transporting materials, supplies, and finished goods at various nodes of the supply chain.
2. Customer service targets related to quality, item availability, order accuracy and on-time delivery

Cost monitoring is both an art and a science that should involve input and insights from Finance. While too little inventory can lead to stockouts and increased expedite costs, too much inventory can have a negative financial impact due to write-offs of obsolete and expired inventory. Constant analysis and evaluation of supplier scorecards, transportation and warehouse costs and partner performance is key to ensuring inventory costs and customer service targets are consistently achieved.

Refine your S&OP Process

Anaplan’s calculation engine provides a scalable solution that makes it simple to conduct complex analysis of SKU’s across brands, product families, categories, retailers as well as time. Organizations can leverage Anaplan’s inventory optimizer to supplement inventory management policies like safety stock setting and cycle stock optimization in order to determine ideal stock levels across all nodes of the supply chain network as well as conduct both top down and bottoms up planning and analysis. Anaplan’s collaborative platform can integrate data from various sources providing a single source of truth allowing for truly connected planning and visibility amongst all trading partners including raw material suppliers, 3PL warehousing and transportation providers, customers, and manufacturing and production facilities, reducing the probability of the bullwhip effect. Reducing holding and transportation costs while meeting or exceeding customer service goals is a balancing act, and having the right technology to increase visibility and calculate key metrics helps supply chain planners determine ideal inventory levels and location to achieve that balance. Organizations should continue to refine their S&OP process to optimize inventory planning in Anaplan while using the platform to help define and maintain inventory targets across the network, forecast inventory levels and optimize inventory.

See Anaplan’s inventory management capabilities in action by checking out our Daily Inventory Management app on the Anaplan App Hub.

By Shannon Bachar | Marketing Coordinator

Teamwork: As individuals we’re bright. As a team, brilliant. We believe that great people working together can accomplish the extraordinary.

At Akili, no one stands alone. Teamwork is essential at this organization and is one of the reasons we are successful today.

It’s evident that we exercise teamwork at the office. I mean, it’s a part of our everyday practice and necessary to finishing projects to complete client satisfaction.

However, I’ve noticed that focusing on building teamwork outside of the office, leads to even greater achievements inside. So rather than share how we practice teamwork within these glass doors, I have a couple of outside experiences that immediately come to mind.

One instance in particular, is when our team went rock climbing. I felt like calling it quits for the day after a couple of climbs, when my fellow Akilians convinced me to go for a tougher course for one final go. One of my coworkers offered to be a belayer and the other was helping to guide me where to climb next. About halfway through I was ready to give up, as both my arms and legs were trembling from the effort. Instead of bringing me back down to solid ground like I pleaded, my team expressed confidence and pushed me to keep going to the top.

I finally made my way to the top and by no means was it an individual effort. In that moment, I was proud that these were the kind of people that I worked with. They’re the ones that help you push the envelope to be the best that you can be, and you never feel like you’re alone on the path to success. We all want each other to benefit and will work as a team to get there, even if it means you don’t receive individual praise.

In addition to one-off team building events, a more obvious teamwork activity is the Dallas Marathon relay we run every year. We put two teams up against each other with no real pressure to perform, only to work together and have fun along the way. The marathon relay truly exemplifies teamwork, as we each bring intensity to get a decent time and encourage both teams at the wristband hand-offs. After, we all meet up for drinks and congratulate one another for putting in the work to finish.

Each of these experiences prove that we Akilians maximize our strengths, bringing out the best in one another to work toward a common goal. We do more than get along. We show the ability to put the needs of Akili above our own and place each other in the best position to succeed. We all have something unique to bring to the table to accomplish the ‘extraordinary’.

The fact that Akili emphasizes getting together outside of the office speaks volumes. When you get to know your coworkers in a casual setting over a drink or fun activity, you build a stronger relationship and value it, not ever wanting to let them down. Therefore, teamwork at the office becomes almost seamless.

And I believe that’s why we continue to succeed.

EXECUTIVE SUMMARY

Planning complexity in manufacturing and order fulfillment stem from the attempt to “fit” forecasted demand with available production machines, while hoping to leverage an algorithm that will provide the best “bang for the buck”. This algorithm normally incorporates Level 2 production machine metrics like run-rate, machine efficiency, and scrap rate to achieve an optimal mix. However, disparate operating schedules across plants, outages, availability and lead-times of required packaging material, as well as dependent (i.e. tolling) external processes can make creation of reliable, time-phased production schedules challenging.

Furthermore, for many organizations, Sales and Production work as two independent business units that share information via e-mail messages and spreadsheets. The communication gap and operational lag caused by this method of “collaboration” does not support the need for highly inter-related sales forecasting and production planning and makes it even harder to create a reliable schedule. Many companies have found that spreadsheets are not able to keep up with the constant flux in demand and are wrought with errors, leading to the creation of a production schedule that garners little trust from users and does not properly support business needs. The Production Planning application developed by Akili on the Anaplan platform provides a cloud-based tool that uses real time data to provide a solution to common production planning challenges.

INTRODUCTION

As globalization increases and markets continue to shrink, supply chains will become ever more complex, and with over thirty percent of companies considering Excel, a supply chain system, many companies will be left behind if they do not begin to leverage planning tools and cloud solutions as do their best-in-class competitors. Out are the days of planning in functional silos and seeking only to minimize costs. In order to remain competitive, companies need to adopt more collaborative planning processes that include cross functional interaction as well as external partner integration where customer requirements drive strategic decisions.

While process improvement is an admirable goal, realizing a mature, competitive supply chain also requires a technology solution that can fully support business processes without restricting users to an out-of-the-box solution that either restricts planners or forces organizations to pay for a plethora of unnecessary features that will never be used. Anaplan is the ideal tool to help organizations usher in a new day of truly connected planning and technological competitive advantage.

Anaplan allows organizations to build multiple applications (apps), or models, that support varied business planning processes from Supply Chain to Financial Planning, Sales and Marketing, and IT. At Akili, our Financial Planning & Analysis (FP&A) and Supply Chain expertise places us in a category of Anaplan partners with an ability to not only develop and configure the technical aspect of Anaplan models, but to also guide our customers through business process improvement that allows them to bridge the gap between functional areas and external partnerships, creating a true Sales and Operations Planning (S&OP) process supported by a cloud solution that gives a new meaning to connected planning.

SUPPORTING BUSINESS PROCESSES WITH ANAPLAN

Organizations with mature planning processes, in our case fictional ACME and Co., will begin with a consensus forecast generated via collaborative meetings and cross-functional Sales and Operations Planning (S&OP) sessions involving Sales, Marketing, Finance, and Operations. The final forecast, including assumptions and notes from each department, is maintained in Anaplan for access to real-time changes and updates visible to everyone involved in the planning process. This forecast is then ‘married’ with open sales orders in the Production Planning model, used daily by Production Planners.

Using a customizable, dynamic algorithm, we’ve developed the Anaplan “backend” to compare forecasted weekly volume with actual sales order data and to choose the greater of the two. It also accounts for on hand inventory, including safety stock, and WIP as it determines and prioritizes the true production requirement. The Production Planner is able to flex demand figures against available machines and run what-if scenarios to create multiple, comparable versions of the Anaplan-generated production schedule based on current conditions outlined above. Because it always uses real-time data, the production schedule can be run and published as frequently as is required by the business.

THE MODEL

Organizations can perform true modeling and scenario planning by leveraging Anaplan’s capability to create and recommend production schedules by analyzing resource availability and capacity and demand. Anaplan arrives at a different ‘best fit’ according to resource availability, including displaying an ‘overcapacity’ error if demand exceeds capacity.

The model also provides the added flexibility of integrating subsequent processes, gaining full visibility to the supply chain. For example, the Packing Schedule and Warehouse Labor & Inventory (not detailed here) schedules are always synchronized with changes made by the Production Planner.

DETAILED DESIGN VIEW — PRODUCTION PLANNING APP

The Anaplan model developed for ACME & Co. has three main components:

• Data Hub integrated with an enterprise ERP system to be used as the source of truth for sales and production data

• Sales Planning dashboard with sales orders and customer and production distribution

• Production Planning dashboards to be used as the core function of the application

As shown below, the model uses demand data as an input and several multi-dimensional calculation modules to generate the final production schedule.

PRODUCTION PLANNING DASHBOARDS

Machine & Product Setup and Analytics

This dashboard displays product and machine compatibility and dependence, also known as “fitting,” since not every product can be produced on every machine. It also visually indicates portions of the algorithm that consider machine run-rate and efficiency, scrap percentage and mold limit per run as it determines at the best-fit.

Capacity & Production Analysis

This dashboard sums the fitting analysis from the previous dashboard and compares capacity, including visibility to excess capacity, to planned production (output).

Production Schedules

Planners can use this dashboard to indicate machine uptime/status and create a printable/exportable production schedule. The Anaplan generated production schedule is determined heavily by planner indication of resources being up (running) or down (outage).

CONCLUSION

Supplier diversification and outsourcing mean increasingly complex spreadsheets that require hours of manipulation to arrive at superficial solutions that only consider two-dimensional data and linear modeling. Anaplan however, allows for multi-dimensional modeling with real-time data from across the supply chain network providing actionable insights to planners, giving them the ability to analyze multiple what-if scenarios in minutes. The Akili ACME Production Planning model demonstrates the utility of scenario planning and data visibility from internal departments and external partners.

Anaplan offers a robust solution to inflexible, siloed planning systems and provides a no code, dynamic cloud-based platform that can scale and transform as the business does. As a gold level implementation partner, Akili is the ideal firm to assist organizations with long-term development plans and process improvement. For more information about the production planning model or to schedule a demo of the full model contact Sean Granfield.