Oracle

Advanced Planning
Inventory Optimization

Dan Natchek
Senior Sales Consultant
Introduction
Business Changes
Mass Customization
Increased
w/ Shrinking Product
Outsourcing
Life Cycles

Inventory: How Much, Where?

Increased Increasing Relative

Competition Material Cost
Traditional Planning Process
Multi-step, high latency, limited collaboration
Customer Forecast Supplier Capacity

Tier 2

Tier 1

Distribution Production Manufacturing

Plans Plans Plans
Marketing
Forecast

Sales
Forecast
?
Mfg.
Forecast
t = weeks
 Business Impact
Traditional supply chain

Customers Region 1 Region 2 Region 3 Region 4 Ÿ  Each node in the

supply chain holds
high inventory buffers
–  End products
DC 1 DC 2
–  Subassemblies
–  Components

Assembly Ÿ  Inventory policies are

Plant
decided at the
individual nodes
Component
Shop

Suppliers

Safety stock
A Better Way
Oracle’s Advanced Planning Solution
E-Business planning solution: zero latency, real-time collaboration
Customer Forecast Supplier Capacity

Tier 2

Tier 1

Portal Portal

Process
Single Plan
Marketing Automation
Forecast

Sales
Forecast
Consensus
Mfg. Forecast
t = hours
Forecast
 Oracle’s Inventory Optimization
Solution
Lower inventory and higher customer service
Customers Customers
Region 1 Region 2 Region 3 Region 4
Ÿ  Inventory levels are
determined across the
entire supply chain
DC 1 DC 2 –  End products
–  Subassemblies
–  Components
Assembly
Plant Ÿ  Inventory policies are
coordinated across the
entire supply chain
Component
Shop

Suppliers

Safety stock
Oracle’s Inventory Optimization
Solution
Enables you to:

Ÿ  Reduce inventory
Ÿ  Improve delivery performance
Ÿ  Lower procurement costs
Ÿ  Drive continuous improvement
 Oracle’s Advanced Planning Solution
Complete e-business planning solution

Supply Chain Intelligence

Demand Planning

Planning level Inventory Optimization

Supply Chain and

Manufacturing Planning

Design Order Promising

Sell
Manufacturing
Plan Scheduling
Finance Assets
Market Supply Chain
Projects HR Collaborative Planning
Procure Event Management

Service Minutes Hours/Days Weeks/Months Quarters Years

Manufacture Time
Fulfill
 Oracle’s Inventory Optimization
Solution
Capabilities

Ÿ  Optimize inventory investment

–  Maximize service level while minimizing inventory investment
–  Recommend inventory postponement
–  Include supply, demand, and lead-time uncertainty
–  Establish service levels by customer, channel, and product

Ÿ  Stochastic optimization: for planners, not programmers

Ÿ  Strategic sourcing decisions and purchasing budgets
Ÿ  Integrated demand, inventory, and supply chain planning
Ÿ  Integrated performance management
Optimize Inventory Investment
Maximize service level while minimizing inventory investment

Ÿ  Trade off customer service

level with total cost
Ÿ  Choose the best service
level strategy based on
–  Inventory carrying cost
–  Production cost
–  Procurement cost
–  Revenue
–  Profit

Ÿ  Compare alternative
scenarios
 Optimize Inventory Investment
Inventory postponement

Customers
Region 1
Customers
Region 2
Ÿ  Determine where to hold
inventory to guarantee a
desired service level
–  Manufacturing plants
–  Distribution centers
–  Central warehouses
Distribution Distribution
Center 1 Center 2 Ÿ  Determine what stage of
production to hold
Assembly
Plant inventory at
–  Finished goods
Safety stock
–  Subassemblies
Safety stock
with postponement –  Raw material
Component
Shop
 Optimize Inventory Investment
Model the realities of your supply chain

Supply Demand
Variability Variability

Ÿ  Make better decisions

by including variability
Least Risk
Inventory –  Demand variability
Investment
Strategy
–  Supply variability
–  Lead-time variability

Lead Time Service Level

Variability Requirements
Optimize Inventory Investment
Determine your most profitable investment

Ÿ  Invest in most profitable

products, customers,
and sales channels
Ÿ  Manage commitments to
key customers
Ÿ  Manage product portfolio
For Planners, Not Programmers
Stochastic optimization for planners

Ÿ  Out-of-the-box
optimization
–  No programming
required

Ÿ  Ease of setup
–  Planners define the
problem to solve

Ÿ  Flexible defaulting
–  Service levels
–  Costs
For Planners, Not Programmers
Easily define the planning problem

Ÿ  What is my most
profitable service
level?
Ÿ  What would it cost to
achieve a target
service level?
Ÿ  What service level can
I expect with current
constraints?
Strategic Sourcing Decisions
Determine purchasing budgets

Ÿ  Trade off supplier

delivery variability with
procurement cost
Ÿ  Identify most effective
suppliers to source
materials from
Ÿ  Recommend purchasing
budgets
Integrated!
Integrated demand, inventory, and supply chain planning solution

Ÿ  Fully integrated with

–  Supply Chain and
Manufacturing Planning
–  Demand Planning
–  Oracle E-Business
Applications

Ÿ  Open, standards based

architecture for
integration with legacy
systems
Integrated Performance Management
Helps to answer the tough questions

Ÿ  Is my service level
improving?
Ÿ  Am I selling the most
profitable product mix?
Ÿ  What are the most
significant opportunities
to increase
postponement and
reduce inventory?
Proven ROI
Proven ROI
Case study

Ÿ  Large Aerospace Company

–  Multi part and multi assembly pilot
–  46% improvement in service level
–  27% reduction in inventory cost
Demonstration
Summary
Oracle’s Inventory Optimization Solution
Enables you to:

ü  Reduce Inventory and Improve Delivery Performance

–  Postponement and stochastic optimization
ü  Lower Procurement Costs
–  Strategic sourcing
ü  Drive Continuous Improvement
–  Integrated performance management

Drive Value Rapidly

 Oracle’s Inventory Optimization Solution
Dramatically reduced inventory investment with highest service levels

Without
Oracle

Improve service
level up to 35%
Inventory Investment

Lower
Inventory Reduce inventory
Cost
levels up to 25%
With
Oracle
Reduce safety stock
Higher levels up to 50%
Service
Level

10 30 50 75 80 85 90 95 100
Service Level