Search Results for: inventory-optimization

  • Where Can EOQ be Implemented?

    ByPrimary Researcher

    … threshold for mathematically determining when a product location combination should be placed on a forecast based planning approach like MRP. And when it should be placed on a non-forecast based approach is a bit more involved and is something we cover in the article How to Understand Segmentation Versus Inventory Optimization.
    How Should EOQ and Other Supply Planning Parameters be Calculated?
    One would be able to, for example:
    Item #1: Simulation
    Set the supply planning parameters in a way that one can simulate the impact on the overall supply plan. When using supply planning systems, inventory parameters are typically …

  • The Definition of Reorder Point

    ByPrimary Researcher

    … opposed to forecast-based planning.
    MRP/DRP and APS (heuristic, allocation, cost optimization, inventory optimization) methods are forecast-based planning. As the terminology would indicate, reorder point planning does not require a forecast. The following graphic shows how this works:

    The reorder point is a calculated value, expressed as a stocking level, which is then implemented in a supply planning system and stored as a master data parameter. If a company had 100 products, all of which had a reorder point entered in the product location master, and 50 were excluded from the supply planning run. Let’s say …

  • How MRP Works

    ByPrimary Researcher

    … and data storage capabilities limited the types of planning mathematics and techniques that could be used.
    Interestingly, there are papers on multi-echelon that date from the late 1950s and papers for inventory optimization from the mid-1970s. Nonetheless, it was decades before inventory optimization mathematics could be implemented in enterprise software. MRP, on the other hand, was much faster out of the gate.

    The lag time between development and commercialization and general implementation for simpler methods of supply planning (MRP and DRP) was much shorter than for more advanced methods. Research into advanced methods like multi-echelon planning …

  • How Real is the SAP Machine Learning and Data Science Story?

    ByPrimary Researcher

    … see from Google Trend, the interest in the term Machine Learning is growing. It is now four times more popular as a searched term than it was just a few years ago. 

    SAP has a lengthy history of co-opting things. It has nothing to do with it. Marketplaces, collaboration, inventory optimization, good UI design, databases, IoT, HTML5, and the list go on. SAP can immediately partner with a company and claim capabilities merely through an association of a partnership. 
    How SAP Has Co-opted the Term Machine Learning
    SAP has co-opted the term machine learning with fantastic speed …

  • The SAP Best Practice Scam: How SAP Uses Best Practices to Control the Implementation

    ByPrimary Researcher

    … This allows for extremely easy-to-change attributes, which is unheard of in SAP APO DP.
    SAP APO SNP only has one method to use service level to control stocking levels, which is dynamic safety stock. However, that is no longer the best practice. The best practice is to use inventory optimization, which SAP does not have but best or breed vendors do have.
    BW can neither quickly make changes to the underlying data structures to support changes in the business nor provide best-practice analytics. SAP would probably say they have fixed this issue with purchasing Business Objects. However …

  • How to Use Information Provided by SAP for Software Selection

    ByPrimary Researcher

    … Made in Marketing Literature
    Software vendor marketing literature can take the form of pamphlets or website copy and can be quite easy to get hold of. This literature is very influential in software selection but, depending upon the vendor, often contains false information and is unreliable. For example, I had read numerous marketing documents that explain how a product performed “inventory optimization” (a particular set of mathematics for supply planning), when the software discussed did not possess this functionality.
    To provide further examples and explain what I mean, I have extracted quotes from some marketing literature. Below are some lines

  • The Brightwork Research & Analysis TCO Method Not Methodology

    ByPrimary Researcher

    … always the case. In fact, computer hardware was so expensive at one-time that it was not bought outright but rather was leased. But the phenomenal improvement in computing technology in the last four decades has reduced the costs and increased hardware performance to a stark degree.
    In the book, Inventory Optimization and Multi-Echelon Planning, the graphic on the following page was used to show this improvement:

    This graphic was cut off in 1986 because to continue the growth in speed until the present day would make the early increases imperceptible. However, the hardware contribution to TCO cannot be …

  • How SAP IBP aka "Zoolander" is Going All in on Trendy

    ByPrimary Researcher

    … of JIT and Lean. DD-MRP has not been around very long. And it has been massively exaggerated by its proponents as well as proposing things that don’t make any sense, and yet DD-MRP is all over IBP. 
    Service-Based Optimization
    Service-based optimization is the name for inventory optimization and multi echelon planning. This technology was picked up in the SmartOps acquisition, an acquisition of a marketing leader, but certainly not a technology leader.
    Service level optimization is a good principle, but inventory optimization implementations have looked nothing like what was said about them. I covered this …

  • Brightwork Explorer and Constraining the Supply Plan

    ByPrimary Researcher

    … optimization is a poor fit for both supply and production planning as neither supply planning nor production planning has as their primary objective cost minimization.

    Supply planning is better suited to service levels as the objective.
    Production planning is a better fit for duration optimization.

    Concerning constraining the supply plan, it turns out that the majority of projects that do any constraining only restrict the production resources.
    However, in each case, it now appears clear that only a small percentage of companies will be able to master either inventory optimization or duration optimization.
    How to Use Software to Effectively …

  • The Problem with the Location Isolation of the Calculation of the Dynamic Safety Stock Formula

    ByPrimary Researcher

    … set without concern for what the service level on other product locations should be. This creates a scenario of unmatched goals versus the system’s ability to supply to those goals.
    This is true for all ERP systems and all advanced planning systems, outside of the lightly installed category of inventory optimization and multi-echelon software, which unfortunately does not incorporate constraints into its inventory (aka service level) optimization.
    How Inventory Parameters Should be Calculated
    All inventory parameters should be limited based upon the relative consumption of whatever the resource limitations the company faces.

    In some cases, this will be …