Table of Contents

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Preface
15
Who This Book Is For
15
How This Book Is Organized
15
Acknowledgements
18
Conclusion
19
1 Introduction to Inventory Planning and Optimization
21
1.1 What Is Inventory?
22
1.1.1 Cost of Inventory
22
1.1.2 Purposes of Inventory
23
1.1.3 Types of Inventory
26
1.2 Where Is Inventory Held?
28
1.2.1 Supply Chain Networks
28
1.2.2 Extended Supply Chain Networks
29
1.3 Building an Inventory Management Approach
29
1.3.1 Inventory Control Systems
30
1.3.2 Inventory Management Approaches
31
1.4 Objectives of Inventory Planning and Optimization
34
1.5 Role of Technology in Inventory Planning and Optimization
36
1.5.1 Technology in Inventory Control Systems
36
1.5.2 Technology in Inventory Management
37
1.5.3 Technology in Inventory Planning and Optimization
38
1.5.4 Technology Platform Criteria
39
1.6 Introducing SAP Integrated Business Planning
40
1.6.1 History and Capabilities
40
1.6.2 Solution Overview
47
1.6.3 Network Inventory Planning
51
1.6.4 Demand-Driven MRP
53
1.7 Summary
56
2 Understanding Inventory Variables
57
2.1 Primary Factors that Drive Inventory
57
2.1.1 Demand Forecast
57
2.1.2 Lead Time
64
2.1.3 Order Cycle
68
2.1.4 Variability
69
2.1.5 Service Level Target
69
2.2 Breakdown of Variability Drivers
75
2.2.1 Demand Variability
75
2.2.2 Lead Time Variability
88
2.2.3 Service Variability
91
2.3 Additional Factors that Influence Inventory
92
2.3.1 Service Level Type
92
2.3.2 Replenishment Strategy
94
2.3.3 Stocking Policy
95
2.3.4 Sourcing Decisions
97
2.3.5 Bill of Materials
99
2.3.6 Lot Size and Economic Order Quantities
101
2.3.7 Inventory Holding Cost
103
2.4 Summary
104
3 Configuring SAP IBP for Inventory
105
3.1 Architecture
105
3.2 Building Blocks
106
3.2.1 Attributes
108
3.2.2 Master Data Type
111
3.2.3 Time Profiles
116
3.2.4 Planning Area
118
3.2.5 Planning Levels
120
3.2.6 Key Figures
123
3.2.7 Key Figure Calculation
130
3.3 Planning Area Setup Using Predelivered Content
134
3.4 Versions
139
3.5 Scenarios
142
3.6 Planning Operators
143
3.7 Reason Codes
146
3.8 Data Integration
148
3.9 Planning Views
148
3.9.1 Connection to SAP IBP System
149
3.9.2 Creating a New Planning View
150
3.10 Dashboard and Analytics
153
3.11 Summary
156
4 Modeling a Supply Network
157
4.1 Introduction to Supply Networks
157
4.2 Supply Network Complexity
159
4.2.1 Static Sources
160
4.2.2 Dynamic Sources
163
4.3 Elements of a Supply Network
164
4.3.1 Locations
165
4.3.2 Suppliers
166
4.3.3 Products
167
4.3.4 Customers
168
4.3.5 Source Customer Group
171
4.3.6 Location Product
171
4.3.7 Ship-From Location and Ship-To Location
174
4.3.8 Location Sourcing
175
4.3.9 Production Sourcing
177
4.3.10 Production Sourcing Item
180
4.4 Visualizing Supply Networks in SAP IBP
181
4.5 Summary
184
5 Optimizing Inventory in SAP IBP
185
5.1 What Is Network Inventory Optimization in SAP IBP?
185
5.2 Building Blocks for Inventory Calculation
187
5.2.1 Inventory Replenishment Process Definitions
187
5.2.2 Impact of Primary Drivers on Inventory Targets
189
5.2.3 Impact of Time-Varying Demand
200
5.3 Network Multiechelon Inventory Calculation
201
5.3.1 Constructing the Network Topology
202
5.3.2 Historical Forecast Accuracy for Customer Demand
204
5.3.3 Future Demand Forecast and Variability
216
5.3.4 Demand Forecast Variability Propagation
216
5.3.5 Estimating Service Variability from Source Location
220
5.3.6 Finalizing the Inventory Targets
226
5.4 Summary
230
6 Structuring Inventory
231
6.1 Types of Inventory
231
6.1.1 Flow of Materials and Purpose
232
6.1.2 Cycle Stock
234
6.1.3 Pipeline Stock
235
6.1.4 Safety Stock
235
6.1.5 Merchandizing Stock
236
6.1.6 Prebuild Stock
236
6.2 Further Decomposition of Safety Stock
237
6.2.1 Safety Stock Due to Demand Variability
237
6.2.2 Safety Stock Due to Supply Variability
238
6.2.3 Safety Stock Due to Service Variability
239
6.3 Calculating Inventory Components
241
6.3.1 Operator to Calculate Inventory Components
241
6.3.2 Inputs to Calculate Inventory Components
243
6.3.3 Outputs of Inventory Components Calculation
248
6.4 Summary
251
7 Designing Your Inventory Planning Process
253
7.1 Centralized and Decentralized Inventory Planning Teams
253
7.2 Frequency of the Inventory Planning Cycle
255
7.3 From Reactive to Proactive Planner Tasks
257
7.4 Inventory Planning in Sales and Operations Planning
258
7.5 Sequence of Planning Tasks
260
7.5.1 Step 1: Validate Inputs for Inventory Optimization
262
7.5.2 Step 2: Running Inventory Optimization
264
7.5.3 Step 3: Analyze Inventory Optimization Results via Scenario Planning
266
7.5.4 Step 4: Finalize Inventory Plan
269
7.6 Segmentation
270
7.7 Role of the Inventory Planner
272
7.8 Summary
273
8 Measuring Inventory Performance
275
8.1 Example Supply Chain for Inventory Planning
275
8.2 Key Performance Indicators for Inventory Optimization
279
8.3 Validate Input Quality
281
8.4 Review Inventory Plan
287
8.5 Assess Inventory Drivers
289
8.6 Finalize Inventory Plan
294
8.7 Create Custom Inventory Alerts
299
8.7.1 Inventory Alerts Key Figures
299
8.7.2 Inventory Alerts through Custom Alerts Application
304
8.8 Summary
310
9 Building Intuition and Conducting What-If Analysis
311
9.1 What-If Analysis with Versions and Scenarios
312
9.2 Perform What-If Analysis
313
9.3 Simulating Situations
319
9.3.1 Service Level
319
9.3.2 Distribution Lot Size
326
9.3.3 Periods between Review
328
9.4 Intuition Building
332
9.5 Strategic What-If Analysis
334
9.6 Tactical What-If Analysis
337
9.7 Summary
338
10 Integrating SAP IBP for Inventory
339
10.1 Data Integration Technologies
339
10.2 Manual Data Integration Using the Web UI
342
10.2.1 Integration Process
343
10.2.2 Time Periods
346
10.2.3 Master Data
347
10.2.4 Key Figures
349
10.3 Integration using SAP Cloud Platform Integration for Data Services
350
10.3.1 Architecture
351
10.3.2 Predefined Content
354
10.3.3 Creating Your First Integration
355
10.4 With SAP IBP Applications in the Unified Planning Area
361
10.5 With SAP ERP and SAP S/4HANA
362
10.6 With SAP APO
365
10.7 With Non-SAP Systems
366
10.8 Exporting Data Using OData Services
367
10.9 Summary
367
11 Planning Your Implementation
369
11.1 Cloud Software Considerations
369
11.1.1 Provisioning
369
11.1.2 Implementation
370
11.1.3 Integration
372
11.1.4 Upgrades
373
11.2 Manual versus Automated Workflow
374
11.2.1 Job Scheduling
374
11.2.2 Process Management
380
11.3 Agile versus Waterfall Implementation Methodology
382
11.3.1 Agile Principles
382
11.3.2 User Stories
383
11.3.3 Agile Teams and Roles
386
11.3.4 Agile Phases
386
11.4 Roles and Responsibilities
389
11.5 Summary
391
12 Case Studies
393
12.1 Case Study 1: Manufacturing Industry
393
12.1.1 Company Background
393
12.1.2 Case for Action
394
12.1.3 Implementation Scope and Approach
394
12.1.4 Value Drivers
396
12.1.5 Lessons Learned
396
12.2 Case Study 2: Consumer Goods
396
12.2.1 Company Background
397
12.2.2 Case for Action
397
12.2.3 Implementation Scope and Approach
397
12.2.4 Value Drivers
399
12.2.5 Lessons Learned
399
12.3 Case Study 3: High-Tech Company
399
12.3.1 Company Background
399
12.3.2 Case for Action
400
12.3.3 Implementation Scope and Approach
400
12.3.4 Value Drivers
401
12.3.5 Lessons Learned
401
12.4 Case Study 4: Consumer Products
402
12.4.1 Company Background
403
12.4.2 Case for Action
403
12.4.3 Implementation Scope and Approach
404
12.4.4 Value Drivers
405
12.4.5 Lessons Learned
405
12.5 Summary
406
A The Authors
407
Index
409