Increasing inventory level

[Former Member]

Hi,

I have a problem with SAP APO and increasing inventory levels. I would appreciate your help in this issue.

The forecast accuracy for our products is very good and we don't have any issues in the production planning. But our inventory level is increasing. How can I diagnose where the problem could be? What are the main settings that I need to look at?

Thanks for your help.

Best Regards,

Roy

[Former Member]

Roy

Inventory is a symptom of a problem, not the problem itself. When you say that your forecast accuracy is good, this usually only affects Safety Stock, not all Inventory.

What specific inventory are you talking about - Finished Goods, Raw Material, Work In Process ? Pipeline Stock, Cycle Stock, Obsolete Stock, etc.

So here are some things to consider -

1. Has your demand been increasing or become more volatile ? If so, some of the policies/ settings in supply planning could lead to higher inventory.

2. Have you changed Supply Planning policies/ settings - Lot Sizes, Lot Size Policies, Safety Stock Methods, Safety Stock quantities. etc. This obviously has a huge impact on inventory.

3. Have planned lead times changed - Longer Production Times, longer pick/ pack, goods receipt times, longer transportation lanes ? Adding buffer in planned lead times usually leads to higher inventory.

4. Have you changed your distribution network - Increased number of customer facing locations? Push Deployment instead of Pull ?

5. Has there been a change to product portfolio - Increased number of new products ?

Rishi Menon

[former_member182607]

Roy,

Please take a look at your safety stock settings. Most times they are the culprit.

Thanks,

Subash