Excess inventory ties up working capital, reduces liquidity, and impacts profitability. However, industrial and retail companies rely on decade-old processes and IT-systems to manage their inventory. This process is largely manual, error-prone, and doesn’t leverage today’s technological capabilities. Maximum cost transparency is crucial to identify wide-ranging savings. Yet, it is often limited. Artificial intelligence (AI) is ideal for monitoring ever-changing material demand patterns and supporting people to focus on the exceptions. But to people managing thousands of materials, it is often not available. Real-time analytics could provide instant cost evaluations of intended actions, but real-time analytics again are often not available. Therefore, it is not surprising when proclaimed saving targets are not reached. Those saving targets are often pure fiction, a consequence of not enough software support. It is long overdue to rethink inventory management from the ground up. We did – and brought to life the Inventory Navigator software.

Inventory Navigator

Client challenges – Why it matters

Managing thousands of materials in a dynamic planning environment without adequate tool-support leads to significant manual effort, error-prone, and inefficient. Current IT- systems fail to shift the decision maker’s focus on the materials with the greatest leverage or immediate need for attention. In such an ever-changing environment, it is even challenging to sustain inventory reductions without significant manual efforts. Autonomous material planning – a declared vision for many industrial companies – seems far away, even though the necessary technological elements are already available today.

Logistics planners also lack the software and data-supported guidance on how to realize assumed inventory reduction potentials. Adjusting logistics parameter settings such as safety stocks, rounding values, and lot size methods requires instant information about the resulting financial impact. However, planners remain in the dark regarding the future cost of their actions at the time of implementation.

Thirdly, today’s inventory management is mainly driven by top-down defined cost reduction targets, which are not reconciling the individual contribution capabilities of the business entities. The inherent disconnect between management and operations leads to unrealistic goals for particular units and unambitious goals for others, obstructing possible bottom-line results.

Our approach – How it works

The BearingPoint Inventory Navigator offers a sustainable inventory optimization approach that creates transparency about savings potentials, creates full cost transparency for logistics planners and material managers to support their decision-making. It significantly reduces the manual planning effort by directing a planner’s attention to the exceptions. It is based on three steps:

Identify savings potentials

  • Identification of any non-value-adding stock buffers and inventory composition
  • Multi-level analysis of inventory health to identify focus areas and connect saving targets with meaningful potentials, bridging the gap between management and planners

Would you like more information?

If you want to get more information about this subject please get in touch with our experts who would be pleased to hear from you.