Every company who is reviewing and improving their S&OP processes should build inventory into their process. Here's why.

Customer service is an ultimate goal of the supply chain. Improving service levels not only creates customer satisfaction, but it also yields an impressive financial improvement. At a constant "cost-to-serve," reducing out-of-stocks increases the top line, dropping most of the additional gross margin to the bottom line. Therefore, a key goal of S&OP is to balance demand and supply to minimize out-of-stocks.

Yet many companies are still using weak approaches for planning customer service levels and deriving inventory targets, and are getting equally weak results. Planners still spend most of the time chasing around the supply chain, manually intervening, expediting inventory and inadvertently exacerbating the problem. We call this "the vicious circle," because well-intentioned planners actually make the problem worse.

ToolsGroup is helping customers achieve record customer service levels with demand-driven inventory optimization. Our customers improve short-term forecast accuracy and correctly set safety stocks, achieving up to 99+% customer service levels while significantly cutting inventory. They employ demand profiling and advanced consumption logic to improve short-term forecasts and remove persistent forecast bias.

Supply chains are fraught with demand volatility and supply uncertainty. In this environment, inventory buffers act as the "shock absorbers". ToolsGroup solutions understand these demand fluctuations and volatility and optimized and re-optimized inventory mix regularly, in step with the speed of change in your business environment. We help you achieve outstanding service levels.

Leading companies who are including inventory in their S&OP process reduce stockouts 30-50 percent while reducing inventory and costs by 20-25 percent. Returns on investment are almost universally measured in nine months or less. But the real pay off is a stable, efficient supply chain environment.