Tuesday, November 20, 2012

Inventory projections are an important part of any KPI framework... The LIS is NOT!

I hear many of you asking for future inventory projections, so you can plan supply to variable demand and end up with optimized stock levels, exceptional service levels and good availability.

I believe that this is a very valid request and inventory projections must be part of any KPI framework. But mostly I hear advisers talking about current and past inventory. In some cases a reduction is proposed, so that future inventory is less than it is now (some of these consultancies even want a percentage of the reduction). So what if you need more? Inventory optimization is about striking a balance between availability and surplus (dead stock) and should be checked against future requirements. To just look at dead stock today, does not help you to make decisions about your replenishment, planned consumption, availability and stock level in the future.

Before I go about how to plan for future, optimized stock level, I would like to talk about how NOT to go about them.

You probably heard them... They might have knocked on your door... They might have even made some money wasting your time? I am talking about the LISers. Those people unaware of SAPs new developments (and every adviser should be obliged to be up-to-date on SAP developments) , unaware of BI, BOBJ, Add-On tools or enhancements to measure, monitor and evaluate the SAP supply chain... other than by means of the LIS (the Logistics Information System)

They get excited by a red line on black background or a dual classification that takes about ten minutes to call up and leaves absolutely no room for customization (and looks like crap). They promote using info structures which have no flexibility, are extremely cumbersome to fill and any query on them runs forever. They tell you that SAP does not provide support anymore because the LIS 'just works' (yeah right). But most insanely,they teach you all the tricks on how to get around and spend hours working in the LIS. Who cares?! And who wants to get around in the LIS?

So stop talking about the LIS. SAP doesn't talk about it anymore. And neither does anyone else. If this is your only play, you will not make it through the first quarter.

Future inventories are designed by using a KPI framework in a planning environment. Past consumption is important but so are future projections. Only if you put the two together you can make an assessment whether you need less or more. Availability and agility is as important nowadays as is less waste (in overproduction or excess inventory). But what was true yesterday might not be true today. The LISers look back! and back only... everybody else should use the past to build a better future... where the future should be anticipated with a vision, anticipation and foresight (none of which an LISer possesses).

Marc Hoppe and his team from SAP Consulting have developed an Inventory Cockpit that helps with exactly that. On basis of a customized Material Document Aggregation, which the LIS does not have a chance to do, the Inventory Cockpit provides a multitude of KPIs and measures to determine future inventory levels - amongst many other things.