Creating and unlocking value in an organization starts with knowing precisely where things stand, and where the opportunities for improvement lie. To help, SAP’s Performance Benchmarking group publishes a short analysis each Monday, highlighting hot industry topics and high-impact strategies. This week’s analysis focuses on inventory management and service-level optimization, and is written by Neha Makkar.
KEY QUESTION: What is the value of inventory optimization?
Source: SAP Performance Benchmarking
KEY TAKEAWAY: Today’s hypercompetitive business environment continues to fuel increasing complexity in supply chains and manufacturing processes. This complexity challenges companies to free up working capital while still maintaining high levels of customer service—companies must deploy inventory across the supply chain to meet customer demand and, at the same time, keep costs in check.
Unfortunately, many organizations are far from best practice in this effort. According to research by SAP Performance Benchmarking, for instance, only 37 percent of organizations perform forecasting for all combinations of SKUs and inventory locations. Similarly, just 30 percent of organizations worldwide report formal, globally applicable processes to manage safety stock levels with clear accountability. And only 20 percent say they have the capability to have safety stock violation events trigger workflow messages directed to responsible personnel with an automated escalation process.
That may seem like a simple step, but the impact tends to be dramatic: According to our analysis, those organizations where safety stock violation events trigger workflow messages directed to responsible personnel with an automated escalation process have, on average, 31 percent lower revenue loss due to stock-outs.
Note to ASUGNews.com readers: SAP’s Performance Benchmarking program is a strategic service sponsored by its Value Engineering organization. Originally launched in 2004 together with ASUG as a forum to exchange metrics and best practices, the program today has grown into a global effort and one of the largest such programs in the industry—with more than 14,000 participants from more than 4,000 companies and studies available in 12 languages. Participants receive—free of charge—customized and confidential benchmarking comparisons against industry peers as well as aggregate analyses. To participate in the SAP benchmarking program, visit https://valuemanagement.sap.com.