Overview

Sales and operations planning (S&OP)

models generally plan to a target

inventory level defined externally or

calculated based on metrics such as

days’ supply. This is true in most

enterprise resource planning (ERP)

systems as well. The result is that any

company that keeps significant

inventory can improve performance

by managing it better and that’s what

SAP IBP for inventory does. Using a

set of advanced statistical processes, the inventory application evaluates both demand and sources of variation and customer service levels not only at a location, but across the network. The result is a recommended time-phased inventory targets at every node of the supply chain.

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The process

1- Validate Inputs (Forecast, Forecast Error, Service Levels, Lot sizes, Lead Time, Lead time variability)

2- Execute Multilevel Inventory Optimization that suggests safety stocks across the network meeting the target safety levels with the least cost solution. 

3- Simulate by altering inputs. 

4- Finalize the safety stocks and promote to S&OP or supply planning.