Inventory Optimization Summit, San Francisco

This years West Coast Summit, organized by Blue Harbors and bigbyte, took place at the Courtyard San Francisco Downtown and we just wrapped it up yesterday afternoon (March 28th).

It was a success in all dimensions. Marc Hoppe of SAP Germany presented and live-demonstrated very helpful SAP Add-On Tools that enhance the supply chain experience and increase effectivity, automation, profitability and transparency in the SAP supply chain. The customers present enjoyed and appreciated live demos of the MRP Monitor for automated policy setting with simulation and mass update tools for safety stocks and lot size procedures, an Inventory Controlling Cockpit for analysis and optimization with a superior framework of KPIs. The Service Level Monitor was demonstrated as well as the Replenishment Lead Time Cockpit that provides the user with a way to keep lead times accurate and measure variability. Great appreciation was also given to the Capacity and Production Controlling tools which help, like many of the other tools, to keep the data clean, improve on the process and increase automation.

Then Josh Riff, of Blue Harbors, talked about an integrated parcel shipping solution inside SAP that helps customers save time and money.

I myself, talked about Effective Materials Planning, Sales Availability Checking and Transfer of Demand and how to model and measure a scheduling system with SAP value stream mapping. All using standard SAP ERP software, enhanced by the SAP Add-On Tools.

It was the first IO Summit for the SAP Add-On Tools and the large attendance and appreciation of the customers present motivates us to organize many more. 

I am frequently blogging on the SAP Add-On Tools and you can get more information on my YouTube channels and the SAP, Blue Habors and bigbyte websites.

Inventory Optimization Summit - San Francisco

Should you be in San Francisco tomorrow, March 27 and March 28th, drop by our IO Summit at the Courtyard San Francisco Downtown.

We will be presenting some really exciting AddOn Tools by SAP for Inventory and MRP Optimization. Keynote Speaker Marc Hoppe of SAP Germany will be there as well as Josh Riff, Thorsten Raab of Blue Harbors and myself from bigbyte.

We'll present some software functions but there will be lots of time for discussions and mingeling with other SAP users and customers.

more info at http://iosummit.com/

why setup optimization is NOT the only thing you need to worry about

I don't get it! For some reason, wherever I go, people want 'setup optimization'. Consultants use that term in every capacity - literally! - and lead their customers down the path of 'manufacture your products to the best possible sequence of setups !' Is that really what production sequencing is all about? What happened to demand driven scheduling? or lean processes that reduce the waste of overproduction?

One particular consultant once stated: "Optimize your setups so that you spend less time setting up and more time producing."

That is not what I would recommend to my customers. ...more time producing what? Product that lies around in inventory because no one cares for it? Shouldn't we rather figure out how to produce as close to what the customer is demanding, rather than freeing up capacity without thinking about what that free capacity will be used for?

Yes, setup optimization frees up valuable capacity, but it does so building huge batches or lots of 'like' products. It is directly counter to the lean principle of small lot sizes. I am not promoting 'batch size of One' here, but I do want to warn of the 'quick fix' for your capacity scheduling problem that so many people present in your SAP optimization program.

Have 'setup optimization' in your toolbox. there are situations when it makes sense and in combination with other strategies it can be very effective. But do not work with it in an isolated fashion as the 'fix it all', just because that's all your adviser knows about effectively scheduling a line.

The Sales Order Availability Check: With or Without Total Replenishment Lead Time ?

If you look at the 'Scope of Check' that was setup for your Sales Order Availability Check, you'll see a choice that says: 'Check without RLT?'

Besides the question being a bit confusing (when I check it on, is it with or without RLT??), the decision has many, some hidden, implications. First off: when the choice is checked, your availability check performs its routine without the Total Replenishment Lead Time.

So what is the difference between the two? Let's look at an example:

Assuming you have nothing in inventory today and a customer orders 100 pieces with a desired shipment sometime in the near future. There are 50 pieces coming from the production line BEFORE the customer wants to pick up 100, and 50 coming in AFTER the customer wishes to pick up 100 - the last 50 are coming after the end of the Replenishment Lead Time.

If our sales availability check performs with Total replenishment Lead Time (the option in the 'Scope of Check' is unchecked), the following happens:

The system checks ONLY within the Replenishment Lead Time and ignores all receipts outside of it. It also assumes unlimited availability at the end of the TRLT. Therefore 50 pieces can be confirmed to the customer's requested delivery date and 50 are confirmed just after the end of TRLT.

This has the following implications: First, the sales order will confirm ANY quantity, no matter how crazy the request is, right after the TRLT, and second, it confirms quantities that are not on the schedule or even on the plan at that moment. Only after MRP is run, there will be a planned order to meet the new demand. This is a very unreliable and noisy way to do business and, in my personal opinion, only makes sense of you run MRP every day, or in a Make To Order situation, where there is no stock, nor any receipts.

On the other hand, when you check without Total Replenishment Lead Time, the system checks the entire planning horizon for receipts, but doesn't let you confirm if there aren't any.

Doing this right is imperative to business success, leveling demand, reducing noise in the production program and increasing visibility on what's demanded for the production scheduler and what's available for the customer sales representative.

Postponement and SAP value stream mapping

Please see a video on Postponement and the introduction of an Inventory / Order interface to increase agility, flexibility and decrease the waste of overproduction.

The video also explains SAP value stream mapping

SAP Postponement and value stream mapping