Inventory Optimization in Utilities through Collaborative Planning - Part I
Utilities have been focusing on improving their supply chain management to enhance performance, profitability, productivity and service levels. All this while, an Improved Working capital and lower operational costs were the main benefits that the organizations targeted through proper management of supply chain. However, the folks out there have now started realizing the importance of channelizing the SCM potential for an effective Inventory management within the industry.
Collaborative planning, a key aspect of SCM has started gaining importance owing to its potential in bringing the required co-ordination between the stakeholders for an enhanced information sharing , improved replenishment process and accurate demand forecasts. Issues related to optimal utilization of Inventory had been plaguing the industry for a long time now and collaborative stands out to be a winner here.
Collaborative planning not only strengthens the accuracy of the material forecast but also aligns business processes across function to the organizational goal. Since the materials used in utility companies vary widely in their characteristics/ attributes, consumption pattern, handling, cost, lead time etc. it becomes imperative for companies to focus on the granular level to forecast the need for items and their replenishment strategies. Material forecasting done in isolation will not help realize the benefits that a collaborative planning offers.
Through this blog we will discuss how inventory optimization can be achieved through some of the key function of collaborative planning such as enhanced demand planning, integration of forecasts with work management and forecasting by segmentation of materials using re-order point and distribution requirements methods.
Fig.1 shows how a collaborative planning effort should be working in a utility.
Inventory Optimization Issues Plaguing the Utility Industry
Ineffective integration of supply chain management with utilities operations hamper the prospect of realizing huge benefits that are on offer. Increasing material returns, excess inventory of obsolete and non-moving items, rescheduling or abandoning work due to missing materials are the main issues plaguing the utilities. Utilities have invested significantly in enhancing the work scheduling through better use of ERP tools but the issues such improper alignment in supply chain internally within the organization, leads to Vendors/Suppliers bearing the bulk of the loss and mistrust among suppliers with the partner organization. Utilities have gained significant strides in better crew utilization by improving the planning and scheduling processes, but promised benefits have not materialized due to lack of co-ordination between the materials and the operations department.
In the next part of the blog we will see the collaborative planning efforts and the effect it has on the utilities