Could I cut down my inventory cost by a million pounds with Anaplan?

Posted by Alejandro Gomez on 18-Mar-2020 12:00:00

OH Anaplan Supply Chain Inventury

The answer, of course, is “yes”. OK, you are right: it is rather easy to cut down inventory cost!

So, let me rephrase it to answer the question you are really asking: “can I release working capital from my inventory while maintaining my desired customer service level?”

And the answer is still “yes”. Find out in 5 minutes how to keep optimum Safety Stock levels across your distribution network leveraging Anaplan’s unique calculation and collaboration capabilities along with Olivehorse’s unparalleled experience in Supply Chain Planning and Execution.

OH Anaplan Multi Echelon Safety Stock Blog March 2020

It is not a secret that to cope with today’s intense competition and demanding customers, Supply Chains in medium and large companies have a lot of moving parts that introduce a good deal of volatility and uncertainty into the Inventory Planning process.

OH Anaplan Multi Echelon Safety Stock Blog March 2020 pic2

Simplified representation of some of the “moving parts” across a Supply Chain Network which can impact on the calculation of total Safety Stock.

Before reviewing what are the benefits of using Olivehorse’s Multi-Echelon Inventory Planning Model in Anaplan to deal with that uncertainty and reap nice returns on the investment – which we will do in as little as 5 minutes - here is a real life story to illustrate “why” such a solution could be necessary.

One too many engines

I recently met in London a Supply Chain Manager from an airline company. During our chat, he asked: “can an Inventory Model save me an engine?”

Airlines have a vast inventory of spares. Some of them are just bolts or armrests for the seats, but other items in the inventory, such as new engines for their airliners, are more mission-critical and entail greater financial commitment.

Due to this need for categorisation of the stock based on size, cost, replacement rate or importance, and because of the variability in the volume of flights and type of airliners flying to different destinations across the seasons, the airline company were in need of a responsive and transparent way to plan quantities and locations for their inventory of spare parts.

At this point is easy to imagine that the lack of responsiveness and visibility led them to overstock in order to ensure the desired service level, especially for all the most critical spares such as the engines.

Since the cost of one of these engines is in excess of £1 million, think of the great return that a reliable and transparent Multi Echelon Inventory Planning Model could boast if they could only optimise the stock as the landscape changes and, as a result, reduce the amount of engines by one single unit!

OH Anaplan Multi Echelon Safety Stock Blog March 2020 Aero Engine pic1

Either because the items in our inventory are costly, perishable, central to our business or for any other reason, a proper stock planning always pays-off.

One too few engines

I know what you are thinking. And you are right. In my story, the cost of falling short in engines is higher than overstocking.

We use the story above as an example, although it is real, of how a company can incur into significant overstock in order to avoid disruptions in their operations, and also because it illustrates the importance and potential returns of optimising your stock.

But, indeed one too few engines could lead to cancelled flights and harming the brand’s reputation. This is why the first (out of two) operative word here is:optimisation”. This is how Olivehorse’s Multi-Echelon Inventory Planning model brings value: not just cutting down your inventory but optimising the quantity throughout the network to ensure a given service level.

Not too many, not too few. Just the right amount in the right place.

So, what is the other operative word?Transparency”. The ability to track how you ended up with the amount of optimal stock that the screen of your computer shows and so, put trust in your data and plan your business accordingly.

In case you are wondering about “transparency” being as important as “Optimisation” here, let me remind you that not all the Inventory Planning solutions are the same. Especially legacy point solutions used to be rather cumbersome and opaque, and can produce results that are accepted as being gospel due to the rather high degree of secrecy surrounding the algorithm used.

OK, I think is clear now why a (new) Inventory Optimisation solution is needed. Let’s wrap this up: how can Olivehorse’s Multi-Echelon Inventory Planning Model in Anaplan help you out?

Multi-Echelon Inventory Planning Model

Bearing in mind all the above, Olivehorse’s Inventory and Anaplan practices have released in conjunction a Multi Echelon Inventory Planning solution to broaden Anaplan’s offer of Solutions for Supply Chain, achieving the potential benefits and overcoming the shortfalls from the legacy solutions.

In order to deliver value to any company holding stock, the Model complies with both Anaplan’s Best Practices (to release the platform’s unique computing and collaboration capabilities) and Industry’s Best Practices when it comes to the processes and algorithm used to determine the optimal Safety Stock.

OH Anaplan Multi Echelon Safety Stock Blog March 2020 pic3

The quantity of stock needed, and therefore its cost, behaves differently to increases in the Internal Service Levels in different echelons of the distribution network. Therefore, the lowest Safety Stock cost is not necessarily achieved with the lowest Service Level.

Here is the deal with the Multi-Echelon Safety Stock Optimisation Model:

  1. Accurate: Best-in-class algorithm to calculate Safety Stock amounts.
  2. Detailed: Safety Stock calculation per product and location.
  3. Transparent: you will know exactly which variables impact on your Safety Stock.
  4. Dynamic: run as many scenarios and what-if analysis as needed.
  5. Immediate: Run new calculations, scenarios and re-plan in real time.
  6. Ready: Off-the-shelf model ready for a fast parametrization and deployment.
  7. Comprehensive: a single version of the truth for your whole distribution network.
  8. Scalable: add new functionalities and customize your solution to meet your needs along every step of the way.
  9. And most importantly, the proof is in the pudding! Achieve high ROI either by Improving Customer Service, reducing Safety Stock levels or even both! Here the latest study on Anaplan’s ROI.

Sound good? If you are interested in exploring how this solution could be beneficial for you…

…Book your free taster session now!

We would love to meet you and have a chat on what can Anaplan do to optimise your inventory or boost your Supply Chain Planning.

So, feel free to Book your FREE Taster Session now where we will spend half a day with you, learing all bout your business and demonstrating the value that Olivehorse’s solutions in Anaplan can bring to your company. 

OH Anaplan Multi Echelon Safety Stock Blog March 2020 Meeting

The consultants from Olivehorse will meet you to discuss how Anaplan can improve your Demand, Inventory Planning, S&OP or any other planning or execution process.


J Vaiksaar

Jonathon Vaiksaar is DDMRP practice lead at Olivehorse and is former Global Supply Chain Manager at Unilever.

Jonathon and his team designed the calculations and gathered all the requirements that the Multi Echelon Safety Stock Optimisation Model had to achieve in order to deliver valuable benefits and overcome the traditional pitfalls of legacy systems.


A Gomez

Alejandro Gomez is Senior Anaplan Consultant and Master Anaplanner at Olivehorse. He has been working with Anaplan for 6 years now and participated in the design and implementation of a several projects across industries and business lines.

Together with the Anaplan team, Alejandro makes sure to capture all the calculations and requirements gathered by the Inventory Team in an Anaplan model that complies with all the Best Practices.

Read more on: Inventory Optimisation, Anaplan