RapidResponse Inventory Planning and Optimization Application

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1 This document outlines the RapidResponse Inventory and Optimization Application Kinaxis RapidResponse allows companies to concurrently and continuously plan, monitor, and respond in a single environment and across business functions. Kinaxis offers a broad array of supply chain applications supported by RapidResponse s single data model and analytics engine, and accessed through a common user interface. This allows our customers to use one product to holistically manage multiple supply chain processes. By using a single product instead of combining individual disparate software solutions, our customers gain visibility across their supply chains, can respond quickly to changing conditions, and ultimately realize significant operating efficiencies. Operational Strategic Sales and Operations Demand Aggregate Supply Capacity (Constraints) Inventory Management Inventory and Optimization Order Fulfillment Master Production Scheduling Supply Action Management Capacity (CRP) Supplier Collaboration Engineering Change Management Integrated Project Management The Building Blocks RapidResponse applications can be deployed individually or in conjunction with other applications. Each of the RapidResponse applications are based on best-practices and standard process flows established by our years of successful deployments at a multitude of world leading manufacturers. The out-of-the-box applications can enable quick implementations, or can act as an advanced starting point for a tailored solution. Designed to be highly configurable, an application can be adapted as desired to meet a company s unique needs without the heavy and ongoing burden of custom coding. The unified set of applications present the building blocks to leveraging RapidResponse across the end-to-end supply chain, maximizing the crossfunctional value that can be delivered by the product.

2 Inventory and Optimization The objective of the RapidResponse Inventory and Optimization application is to determine the optimum level of inventory (whether raw materials, work in process, or finished goods), including order quantities and safety stock, that meet the service level goals of the enterprise. This application provides the capability to determine optimal inventory strategies and policies that support required customer service levels across several echelons of a supply chain. Supplementing traditional inventory management with sophisticated inventory optimization tools, the RapidResponse Inventory and Optimization application supports single-echelon inventory planning (SEIP) and multi-echelon inventory optimization (MEIO). The Added Value of Integrated Applications Among the greatest advantages of any given RapidResponse application is the ability to leverage it in conjunction with other applications as part of a broader, integrated solution. Depending on the need, significant added benefits can be achieved from using related applications to ensure synchronization across interrelated planning processes. Companies that use the Inventory and Optimization application will have also subscribed to the Inventory Management application. Capacity (CRP) Inventory & Optimization Engineering Change Management Order Fulfillment Supply Action Management Sales & Operations Inventory Management Supplier Collaboration Aggregate Supply Capacity (Constraints) Demand Master Production Scheduling Integrated Project Management The RapidResponse and Simulation Engine

3 Performing Inventory and Optimization with RapidResponse The functional capabilities of the Inventory and Optimization application include: Single-echelon inventory planning (SEIP) Identify strategic safety stock inventory levels based on customer service levels, supply variability, forecast error and bias Generate stationary or time-phased safety stock requirements Provide override capability to modify computed safety stock levels based on capacity and expiry constraints Synchronize safety stock changes with ERP Multi-echelon inventory optimization (MEIO) Compute optimum levels of safety stock across several levels (echelons) of the supply chain with the objective of minimizing holding costs Accurately represent the supply chain and configure calculations by: incorporating measures of service time and processing time in the optimization computation identifying nodes within the multi-echelon network as noninventory carrying (cross dock) as applicable using either standard costs or an item s cost attributes (e.g. labor, material, overhead costs) in computing the optimized levels of inventory In the Inventory and Optimization application, collaboration occurs across these functional roles: Role Inventory Planner Material Planner Responsibility This role is responsible for evaluating inventory target levels and updating inventory policies in order to ensure that service levels and inventory targets are being maintained. They are also responsible for analyzing the excess and obsolete inventory position, and managing such inventory in coordination with the material planner(s). The material planner is responsible for analyzing the excess and obsolete inventory position and resolving any identified excess/obsolete inventory in coordination with the inventory planner. Note that this role pertains if the RapidResponse Supply Action Management application is subscribed to and implemented. The RapidResponse Inventory and Optimization application provides the benefit of: A systematic and statistical way to effectively cover supply chain risks An ability to make informed tradeoffs between service targets and inventory levels to maximize corporate performance Improved inventory turns Reduced inventory holding costs Consistently achieved customer service targets

4 Inventory and Optimization Process Components 1 Configure parts for optimization Set up and configure new parts so information can be included in safety stock calculation and order policy recommendations Make adjustments to configuration of existing parts as required (e.g. safety stock model or service level) Generate safety stock recommendations Review safety stock information and select recommendations to implement Review and evaluate impact Review the safety stock planning and optimization changes by assessing the impact on the inventory planning scorecard metrics Collaborate on recommendations that impact activities within lead time Collaborate on recommended adjustments that affect near-term execution to determine feasibility and resolution as required Finalize and publish recommendations Processes in RapidResponse are enabled by the creation and sharing of collaboration scenario(s), notification to responsible user(s), review/edit by user(s), and the acceptance or rejection of proposed adjustments. Commit adjustments Inventory Workbook

5 Unique RapidResponse Capabilities Rapid What-If Analysis and Deep Supply Chain Analytics Our patented what-if simulation technology enables users to rapidly create many versions of their supply chain environment (called a scenario), regardless of data size, to simulate changes in real-time without impacting the live data. Thousands of simulations can be supported concurrently within a single instance of RapidResponse. Users can test numerous what-if scenarios against key performance indicators and compare them to each other or to a baseline. Scenario parameters are not limited, so users can simulate any number or combination of changes related to supply, demand, bill of material, business policy, capacity, costs and/or pricing. RapidResponse analytics continuously and automatically calculate results in response to changing inputs. RapidResponse has the ability to mimic ERP data models to ensure calculations are consistent across disparate systems. What-if Analysis Supply Chain Analytics Collaboration and Responsibilities Collaboration in RapidResponse is event-driven and is achieved through the creation and sharing of scenarios with all responsible parties. Users collaborate around a particular what-if analysis and are doing so in the same system from which they are drawing the data, and in which they will execute the resolution. Users create a scenario and share it with the appropriate users and include a message about what issue they require assistance on, or feedback for. The Responsibility capability will automatically identify the users who Role-Based Collaboration Consequence Evaluation and Alerting have ownership over certain data, who can then be invited to participate in a collaborative scenario simulation. Collaborators can create a child scenario of the parent collaboration scenario in order to simulate any required actions. The requestor can keep track of the collaboration progress, the alternatives that are being considered, and which changes should be made. Exception-Driven Analysis RapidResponse s exception-based analysis focuses on evaluating events and actions based on their potential impact to the business. It is never enough to know that something has occurred. You need to understand the context, the consequence, and the next steps. Results of what-if scenario simulations are presented in the context of their impact to performance. Users can monitor and be alerted to specific supply chain risks (e.g. late supply) or specific conditions (e.g. a certain metric will be negatively impacted as a result of a particular event or the cumulative effects of a series of events). RapidResponse resources are configured to ensure attention is given to actions that are both manageable and will provide the greatest impact to corporate performance metrics such as revenue or margin.

6 Closing the Loop Most applications have the ability to close the loop on data to the transactional system (ERP), whereby you can send data that is created/edited within RapidResponse back to the transactional system automatically. This avoids a user having to update two systems. In the Inventory and Optimization application, accepted/approved safety stock quantity changes are captured and can be sent back to the transactional system. Managing Performance In addition to the standard corporate measures of revenue, margin, on-time delivery and constraint utilization, metrics associated specifically with inventory planning are included in the application s out-of-the-box dashboards. This allows for focused management of the performance measures that are most applicable to the function at hand. Measures presented in the Inventory and Optimization dashboard include: On Hand vs. Target: A dollarized measurement of actual inventory by part class (e.g. finished goods (FG), semi-finished goods (WIP) and raw material (RM)) compared against the annual plan. On Hand by ABC Classification: A dollarized measurement of actual inventory by ABC classification of parts compared against the annual plan. Demonstrated Service Level: The demonstrated customer service level percentage (on-time delivery), per period, compared against the annual plan. Periods of Supply by Part Category: A measurement of the number of periods of supply that the ending inventory balance (per period and category) is expected to cover. Excess Value: A time-phased measurement of the excess value over a horizon. Obsolete Value: A time-phased measurement of the obsolete value over a horizon.

7 Getting Results Kinaxis RapidResponse enables customers to drive tangible business outcomes by both improving and accelerating analysis and decision making within and across supply chain functions. Significant Inventory Reductions Our finished goods inventory was reduced by 20% within 3 months of deploying RapidResponse. Source: Shellie Molina, Vice President, First Solar TechValidate ID: 589-4FF-2F6 Better Inventory Management With RapidResponse we improved event management for supply with non conformance and improved adherence to inventory targets above 95%. We are consistently managing abnormal scrap below budget (20% below budget). Source: Executive, Global 500 Pharmaceuticals Company TechValidate ID: 1A E Research by

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