Optimizing Good Inventory

Deere & Co. division extends use of planning solution for ongoing optimization of inventory targets

Deere & Co. division extends use of planning solution for ongoing optimization of inventory targets

Pittsburgh, PA  August 27, 2003  The Commercial and Consumer Equipment (C&CE) Division of manufacturer Deere & Co. has implemented the latest version of an inventory planning solution from SmartOps as part of the company's ongoing program to reduce inventory.

The C&CE group has been using the Multistage Inventory Planning & Optimization (MIPO) software solution since 2002 to help the company meet its inventory-reduction goals.

Deere C&CE implemented MIPO to determine the optimal level of inventory needed for each product, across stocking locations and stages, over time, given their supply chain's high seasonality and demand uncertainty.

Larry Lapide, vice president of research at AMR Research, wrote in his July 22, 2003, alert titled "Don't Slash Inventory, Make it More Efficient": "The secret to inventory is to treat it like cholesterol. Much like cholesterol, you want to keep the total as low as possible, but you don't want the good component to get too low, because that is the inventory component that most closely supports customer fulfillment requirements."

Companies need the "good inventories" to cover supply and demand needs, Lapide wrote, as well as to account for uncertainties in both. "For example, safety stocks  be they in the form of raw materials, components, work-in-process, subassemblies or finished goods  are good because they cover the vagaries in customer demand and unreliability in supply," the analyst concluded.

SmartOps said that MIPO enables customers to determine the best possible inventory and order fulfillment plans given inherent uncertainties, multi-location and inventory stage complexities and customer service goals. MIPO dynamically generates optimal inventory targets for each stage of the supply chain while providing visibility into each reason inventory is needed  including safety, cycle, pre-build, in transit and merchandising stock requirements, by item or stock-keeping unit (SKU)  to meet desired service levels and response goals.

MIPO 3.1's inventory targets serve as inputs into enterprise resource planning (ERP) and advanced planning and scheduling (APS) systems, helping them to function more efficiently and to deliver better intelligence for inventory planning and execution, the solution provider says.