Inventory Optimization with SAP

19 You can optimally tune your supply chain and save a lot of money by reducing your inventory without compromising the level of your customer service and the utilization of your internal capacities. Introduction An important objective in a company's supply chain management is to ensure an efficient inventory management. If you examine the way in which companies are actually handling inventory management, the methods employed appear to be good; however, the way in which all aspects integral to inventory management interact is often far from ideal, that is, there needs to be a better system of internal controls for inventory to be managed efficiently. So, you frequently hear statements like the following: " We define the high quality of our services as being our competitive edge, but our service levels are insufficient despite our high stock levels. " " Our machine assignments change five times a day, but we have no idea of the number of sales orders that we are actually putting on hold because of that. " These statements describe only some of the many problems inherent in supply chains today. Despite all the uncertainties and the corresponding countermeasures taken to address these uncertainties, a company's top priority is still to ensure as high a service level as possible to customers. On the other hand, the overall costs must be kept to a minimum. An important key to success in supply chain management is the optimization of inventories, because stock surplus quantities result in an increase in costs and lower profit margins, while inventory bottlenecks cause problems in production and poor service levels. Warehouse stocks are subject to different influencing factors. This book describes these factors and what you can do to efficiently counteract them.Inventory Causes Costs Decisions made regarding inventory management can have a direct influence on the success of a company. Until a few years ago, it was generally assumed that a high volume of stocks guaranteed a successful future for the company. Today, increasing costs force companies to reduce their inventories and warehouse stocks. Therefore, the optimization of a company's inventory Introduction 20 becomes an increasingly important tool for helping companies to save costs. The importance of those inventory costs becomes clearer when you look at the following financial statements: Table 1 contains the financial statement of EPCOS AG, a manufacturer of passive construction elements. The inventory, which is summarized as " Net stocks, …