The Simulator for use with SAP Service Parts Planning is an exclusive service from Neovia that maximizes companies’ investment in this software and reduces risk. This discrete-event Simulator uses actual demand history to generate forecasts, perform inventory planning calculations, distribution requirement planning (DRP) and deployment. It brings users the distinct advantage of analyzing total supply chain costs that result from strategy shifts, variations in supply, network configuration changes and more, all in a risk-free virtual supply chain environment. Results are immediate and help the user optimize
thousands of parameter settings prior to actual execution.
To explore the advantages and quantify risk avoidance associated with using the Simulator, Neovia conducted a study to illustrate the impact of inventory and service performance, plotting them on an exchange curve.
Neovia used demand history from a large, global multi-echelon company. It considered the impact of forecast parameter changes (e.g. trip counters and model selection) while inventory planning parameters remained constant. It also considered the impact of changes to inventory planning (e.g. target service levels) while forecast parameters remained constant. Other constants included stocking criteria and configuration of DRP and deployment.
Optimizing forecast parameters
Neovia executed multiple iterations of targeted service levels to measure the impact of the variable forecast parameters on inventory value. For each iteration, the team performed numerous scenarios through the Simulator to produce a wide range of results. They then measured the impact of the varied forecast parameters on service rates, where resulting inventory values were approximately equal. The Simulator outcomes are illustrated in the exchange curve below.
Optimizing inventory planning parameters
For this stage of the study, the team kept the forecast parameters static while they varied the inventory planning parameters in the Simulator. Again, Neovia executed multiple iterations to generate numerous exchange points for analysis on inventory levels and service rates. The Simulator outcomes are illustrated in the following curve:
Using reasonable and appropriate parameter settings (not extremes), the Simulator found that optimizing only the forecast parameters would have up to a 1% impact on service while varying inventory value by as much as 20%. Changing inventory parameters alone resulted in up to a 10% impact on service while varying inventory value by 23%.
The financial benefits to a large, global, multi-echelon organization through optimized inventory could be huge. Reduction of active inventory has an immediate impact upon cash flow, but profitability will also be improved through reduction of inventory carrying cost, storage, obsolescence, material handling and transport. Increases in availability also benefit profitability by reducing lost orders, increasing customer loyalty, less “fire-fighting” of the supply chain and lower spend on premium freight. For example, a business with a $100 million inventory might expect to realize value of around $20 million to $30 million over five years.
The Simulator: A brief history
SAP Service Parts Planning is the result of a joint venture between Caterpillar, Ford Motor Company and SAP to create a state-of-the-art service parts planning and management solution. Neovia Logistics drew on more than 50 years of experience as supply-chain simulation practitioners and our origins as Caterpillar Logistics to create the Simulator for use with SAP Service Parts Planning. In the process, Neovia created the only software that simulates outcomes from the application’s thousands of adjustable parameters to maximize performance and returns prior to execution. The Simulator is available exclusively from Neovia
Key take away
Groups of parameters can have a huge impact on service rates and inventory. Only by mastering all parameters simultaneously can inventory be truly optimized and performance maximized.
*SAP® Service Parts Planning is a registered trademark of SAP AG Germany and in several other countries.