SAP, Oracle and Accenture weigh in on Inventory Reduction
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Inventory management, as defined by our friends at Wikipedia, is “required at different locations within a facility or within multiple locations of a supply chain network to protect the regular and planned course of production against the random disturbance of running out of materials or goods.” Inventory management is a double-edged sword because supply chain managers must strike the perfect balance between surplus and shortage. Too much inventory often means that a company has tied up a good chunk of capital in a product that might not move off the floor as fast as others. It’s a problem because that surplus is essentially lost cash (until the inventory is moved) that could be spent on other revenue-growing activities. This problem is widespread as a recent SAP survey found that a fourth of all manufacturers carry at least 25 percent more inventory than they have to. Although that inventory usually finds a place to go at some point, it’s still wasted cash in the short-term. Conversely, when a company suffers a shortage of inventory, it pinches suppliers and upsets customers. It can be a disaster for all parties involved in the multi-layered supply chain. Additionally, shortages can mean that suppliers and customers will be reluctant to play ball with a company that fails to accurately manage its inventory levels and forecasting process.
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That’s why the top companies in the world turn to solutions and consulting services from SAP, Oracle and Accenture to help bring inventory down to a manageable and sustainable level. While the initial costs can be intimidating, the end result is a much more efficient operation, a better cash flow and increased service levels across the supply chain. SAP, Oracle and Accenture are three of the biggest players in inventory management and Supply Chain Digital thought it was a perfect time to see what they’ve been up to.
Industry: Computer Software
Founded: 1972, Germany
CEOs: Bill McDermott (Co-CEO), Jim Hagerman Snabe (Co-CEO)
Employees: 53,513 in over 50 countries
Revenue: €112.464 billion (2010)
Inventory Management: “Determining detailed optimal and visible inventory targets across the supply chain that drive successful planning and replenishment in an ongoing manner for every item at every location across time, resulting in lower aggregate working capital with equal or better customer service and lower supply chain cost.” –SAP
Solution for Inventory Optimization: In its value proposition, SAP introduces SmartOps, an integrated end-to-end planning and execution platform that helps SAP manage $40 billion in client inventory. SmartOps helps clients see a 5-10 percent increase in order fill rates and on-time delivery, a 20-30 percent reduction in average order lead time and a 50-75 percent reduction order lead time variability.
Industry: Computer database; Computer software
Founded: 1977, USA
CEO: Larry Ellison
Revenue: $26.82 billion (2010)
Inventory Management: “Retailers today have thousands of items in hundreds of stores, provided by countless suppliers, and distributed through dozens of warehouses via thousands of purchase orders. Each item has its own unique demand pattern for each location, cost, vendor lead-time, pack configuration, transportation cost, and more. It is important to accurately manage these numerous variables to achieve inventory.” –Oracle
Oracle Retail Replenishment Optimization: “Oracle Retail Replenishment Optimization provides an automated, exception-driven approach to achieving optimized inventory, removing the overwhelming requirement to manually set and monitor inventory targets and customer service levels by store and SKU. Instead, it focuses the user on key performance measures and automatically monitors SKU/location demand and supply chain variables to determine and continue to fine-tune optimal inventory for greatest return on this capital investment.” –Oracle
Industry: Management consulting; Technology services; Outsourcing
Founded: 1953, USA (as Anderson Consulting)
CEO: Pierre Nanterme
Employees: 214,000 in over 120 countries
Revenue: $23.094 billion (2010)
Inventory Management: “A surprising number of companies continue to use the most basic of inventory policies—that is maintaining the same level of inventory across all stock-keeping units (SKUs)). Naturally, this leads to stock outs for faster moving items and overstock for slow moving items, compromising customer satisfaction and tying up working capital.” –Accenture
Consulting at its Finest: “An optimization study includes the setting of targets for a broader set of SKUs, as well as the identification of process improvements that can have an impact on stock levels, such as inventory hoarding, demand forecasting and supply reliability. The focus here is on identifying quick wins to remove working capital from the balance sheet and free up cash.” –Accenture