The real cost of shortages & overstocks
Every year, trillions of euros are lost as the result of shortages or overstocks by manufacturers and distributors. Most companies use an ERP system and have good visibility of their stock levels, but inventory mismanagement and the associated financial losses are a bigger problem than ever.
The current situation asks for rethinking how we plan the supply chain as current methods don’t handle variability and uncertainty well.
MRP was invented by Joseph Orlicky in the 60s. MRP was created at a time when there were fewer products, fewer customers, suppliers, and local supply chains. Uncertainty and complexity were lower.
Today is this model still relevant?
To cope with uncertainty, the idea with MRP is to add fixed “extra” stock in the Supply Chain: safety stock.
Because of their fixed nature, the volatility of demand and supply is not mitigated but propagated along the chain.
“How can a company master uncertainty and still run its supply chain in an effective way?”
Gartner believes the answer to this question lies in resilient planning according to their paper “Mastering Uncertainty: The Rise of Resilient Supply Chain Planning”.
And so do we at Flowlity!
Our solution enables you to build a more resilient supply chain. We place decoupling points in the Supply Chain and forecast consumptions and uncertainties for each of those points separately.
Learn more about Resilient planning and download our white paper here >
By adjusting inventory recommendations and continuously improving forecasts using AI, it is possible to achieve further inventory reduction and reduced risk of shortages with the same level of service.
Learn more about our AI technology >
“Resilient planning is defined as mid-and long-term plans that mitigate against uncertainty by ensuring the right degree of resiliency is built in so that short-term plans are more executable.”
