A Cosumer Products Company

A MEIO Case Study

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Highlights
  • Needed Multi-Echelon Inventory Optimization (MEIO) for SAP APO
  • Within 3 months, significantly reduced FG inventory
  • Increased customer service to levels “never before possible”

Project and Objectives

A segment of ConsumerCo’s North America’s operations became one of the first businesses in the world to implement a customer service-driven Inventory Optimization system directly linked to SAP APO.

Day-to-Day

ConsumerCo’s implementation features a new management process whereby customer service level policies are strategically set by collaboration between supply and demand chain personnel. An analytics engine in ToolsGroup’s SO99+ then optimizes the finished goods inventory mix and allocation around these policies. The system, which runs daily, identifies optimal safety stock and inventory targets for each SKU in the multi-echelon distribution network. It sends the targets to the SAP APO supply chain planning system for daily planning.

Promotional/specialty packaging, which is and increasing part of the consumer goods business is managed as well. To meet this important requirement, SO99+ optimizes the inventory levels of the components across the multi-echelon network to drive specialty-packaging assembly at very high fill-rates.

SAP APO and SO99+ Working Together

At ConsumerCo, SAP APO concentrates on the flow of materials through the supply chain and the impact on supply chain resources for example, how an inventory buffer should be replenished to bring inventory back up to predetermined safety stock levels. The job of calculating those safety stocks as part of an optimal inventory mix requires a different optimization technology, which is the focus of ToolsGroup’s SO99+. It employs stochastic optimization techniques to calculate stock mix optimization, complementing SAP APO’s heuristic and linear programming-based techniques used to optimize supply chain flows and capacity utilisations.

Like many of its competitors, ConsumerCo is seeking to move closer to their customers and achieve service level excellence without skyrocketing inventories. Stock mix optimization provided by SO99+ and SAP APO allows ConsumerCo to address this problem as part of an efficient Demand Driven Supply Network (DDSN) solution. SO99+ calculates the supply and demand variability, optimizes inventory targets, and globally mixes the inventory, item by item at each location across the network.

In SAP APO, both Demand Planning (DP) and Supply Network Planning (SNP) are enhanced with complementary functionality from SO99+. The focus of both DP and SNP is collaboration across the supply chain. The objective is to reach agreement on a single set of numbers (forecasts, supply quantities etc.) that all parties can see and work towards. DP and SNP use safety stocks and other inventory parameters as inputs. SO99+ calculates these quantities using stochastic techniques to model demand and supply variability and automatically generate a globally optimal inventory mix across many thousands SKU-locations.

Results & Benefits

ConsumerCo then implmented SO99+ in a second division after a strategic assessment showed a multi-million US$ savings potential in that division also. This was followed by a global roll-out to all major business segments and geographies.

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ConsumerCo is a Fortune 500 global consumer products company that sells its products in more than 200 countries around the world.

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