Over the past few years, I’ve noticed that many companies running SAP overlook some common and very costly supply chain issues. These are problems they know exist, but they do not know how to fix them affordably. I’d like to highlight four common areas where customers have reported a quick ROI, improved employee productivity, and drastic cost savings. I’ve narrowed down the top four common supply chain issues below.
The Top 4 Supply Chain Issues & Fixes in SAP that Pay Back
- Inventory by Proxy – This is where I’ve seen the biggest impact so far – inventory as a proxy for information. In this scenario, you are not confident in your inventory and demand planning information, so you overstock to compensate, or risk under stocking and losing a sale. Many companies are overstocking 20-40% of their inventory, costing millions. This can be fixed by segmenting inventory by volume and demand constancy, and by simulating safety stock and cycle stock with different service level thresholds. Through inventory segmentation and simulation, supply chain leaders can simultaneously reduce inventory levels while maintaining or improving service levels.
- “Finger in the Air” Demand Forecasting – A leading contributor of overstocking (or backorders) is from the inability to accurately forecast demand. With limited tools, companies resort to a one-size-fits-all approach to forecasting. This uncertainty of demand leads to excess inventory. What if you could apply a broad array of forecasting algorithms to each material, and let the system mathematically determine the “best fit”? I’ve seen results that lower inventory levels about 20% through better forecasting alone.
- Manual Departmental Purchasing– I have been surprised to learn the amount manufacturers over spend on packaging, labels, and raw materials due to the inability to buy in bulk across organizations. Millions of dollars can be saved by meeting vendor order minimums, price breaks, and being able to automatically select the right vendor, internal or external, to meet demand. Automation in this area not only improves employee productivity, but can lead to huge cost savings.
- Spreadsheet Production Schedules – Using off-line spreadsheets or scheduling calendars is highly labor intensive and inflexible. This leads to unnecessary change overs, waste, and overtime. What if you could easily schedule, sequence and adjust all within SAP through a simple drag & drop interface inside of SAP? Companies that we’ve worked with have seen 40-50% productivity improvements in their production planning and scheduling time & effort with our solutions.
Consider these four supply chain issues, and how much they might be costing your organization. We have seen customers achieve a 20-40%* inventory reduction, while increasing service levels, and improved employee productivity by 50%.
I know budget planning is a priority now, so I’ll tell you the average price of implementing our SAP-centric solution is $225,000(US)**, with an average implementation time of 10 weeks. You will find this a very affordable option compared to others in the market.
This is part five of the itelligence blog series exploring ways to resolve supply chain issues inside SAP ERP. Follow the series:
*18-42% Stock Reduction while improving service levels has been reported by GIB Performance Benchmarking Results, 2015. References available upon request.
** Pricing is based on an average of GIB Dispo-Cockpit one-time license fee and Implementation Services sold in the US in the past 12 months as of 8/1/16. Pricing may vary depending on the number of modules required and company size. Pricing is subject to change. Annual maintenance fees apply.