Inventory planning software with SAP from 4most frees up cash flow

Companies can free up hundreds of thousands of rands by optimising their inventory, particularly when the economy is tough, cash-flow is tight and costs continue rising.

Within this environment, leading SAP Business One ERP business software and technology solutions supplier and implementer 4most hosted a workshop to introduce Valogix, a specialist inventory planning software module that is SAP certified.

The Valogix inventory planning for SAP Business One software module provides automated planning tools designed to improve control and save time by accurately forecasting, replenishing and optimising inventory.

“The result is greater efficiency and the ability to meet the demands of customers and suppliers at lower cost,” said 4most managing director Eugene Olivier.

“The module is available in three versions to cater specifically for single location finished goods inventory planning; parts planning for single location aftermarket service parts and multiple return order planning; and a version for multi-location planning of all finishes goods, aftermarket service parts and MRO inventories. Reverse logistics capabilities are standard on the latter two solutions.”

The Valogix products use advanced algorithms developed by leading academics in the US with the objective of increasing good inventory to increase sales and reducing bad inventory which does not move quickly and sits holding a goodly portion of the company's cash.

“Inactive stock is quickly identified and can be liquidated to improve cash flow. Days of inventory can be reduced from 144 days to 45 days, which chops overheads,” said Olivier. “The Valogix software enables companies to plan five to six months in advance because it provides the information and the science to save man hours, improve controls and save time.”

Companies should calculate their “days of supply” by dividing their average stock value by the cost of goods sold per day. SAP Business One users with Valogix have managed to reduce inventory from four months to three or four weeks. If the average cost of goods per day is R10 000 then the cash required to finance that inventory would be R1.5 million. For every day of inventory reduced, cash comes back into the company.

The major problem with inventory is the lack of capability to easily and accurately forecast requirements - how much to order, when to order and where to stock it. The Valogix software enables easy and accurate forecasting, eliminates the wrong mix of in-stock items, recognises demand variations, manages the stock levels of seasonal items and maintains safety stocking levels of slow-moving items.

It identifies and records long lead times and slow inventory turns, enables critical stock-outs to be identified and dealt with and eliminates excess obsolete inventory. Forecasting is critical as it can lead to overstocking and tie up critical cash for the business.

“Valogix enables stock to be safely reduced while still meeting customer demand when and where it is needed,” said Olivier. “The system automatically adjusts to meet demand slumps or increased demand. It reviews the situation using proprietary calculus, company sales history and all other inventory-related information considered essential to the forecast.”

The automated system process with Valogix includes inventory optimisation, overstocking analysis, spike demand analysis, replenishment planning, order approval and placement, exchange curve analysis and exception management.

“The database links to date synchronisation and the business system database in order to analyse historic information, then selects the required algorithm and makes use of it to display, for example, high moving stock, slow moving stock, random demand and seasonality,” said Olivier. “It will analyse inventory and replenishment data and then rationalise and optimise it. The software also allows historical data from other sources to be imported into Valogix.”

The functionality of Valogix leaves no stone unturned - it tracks, among others, bills of material and their movement, offers forecasts based on patterns calculated by appropriate algorithms, shows lead times, order frequency and offers a planning horizon. It can arrive at an optimal stock quantity to protect against demand spikes based on an analysis over a protracted time frame and provides what-if scenarios for exchange rate fluctuations and other variables. Ultimately, it provides a replenishment plan which highlights everything the stock controller needs to do on a daily basis.

“Meaningful data like this enables companies to make good, well-informed, cost saving decisions regarding inventory,” said Oliver.