Multi Echelon Inventory Optimization
For more than 25 years, Neovia has provided spare parts logistics for a world-renowned British automotive manufacturer. In the spirit of continuous improvement, the Neovia team implemented a new best-of-breed inventory planning solution to replace Neovia’s global, multi-echelon legacy system. By configuring the legacy system to optimize fill rate and inventory using Neovia’s proprietary configuration technology, the mature business already had lean, optimized inventory delivering the target parts availability level. However, the team recognized that SAP’s Service Parts Planning technology provided enhanced functionality to further increase the performance of the supply chain.
The challenge for Neovia’s inventory management and IT teams was to implement SAP’s Service Parts Planning module without disrupting the business or customers. The goals were to: replace the legacy inventory planning system seamlessly; maintain existing parts availability fill rates; reduce inventory; and provide enhanced functionality and capability to drive future benefits.
SAP Service Parts Planning & Neovia’s Configuration Technology SAP’s Service Parts Planning system evolved from a unique co-development alliance between SAP, Caterpillar, and Ford Motor Company. This specifically designed, best-of-breed technology met the complex forecasting, inventory planning, procurement, and distribution requirements of expansive, global multi-facility service parts supply chains. Independently, Neovia developed unique configuration technology specifically for use with SAP Service Parts Planning by applying the same proprietary methodologies successfully employed across Caterpillar and Neovia client networks for over 25 years. The Configurator allows Neovia to test millions of parameter and configuration variable combinations for every network stocking location in a safe virtual environment (vs. trial and error in production). The result is an exchange curve of expected inventory and availability, along with the related operational workloads driven by material replenishment and deployment volumes.
With all conceivable performance outcomes determined, clients can evaluate their options and select the optimal parameters and configurations that achieve their business objectives. Based on the scenario selected, Neovia transfers the exact parameters and configurations determined by the Configurator directly into the SAP Service Parts Planning production environment.
Neovia’s legacy inventory planning methodology was a foundation for SAP Service Parts Planning and served Neovia’s client admirably for many years. However, the decision to move to SAP Service Parts Planning offered many improvements and functional enhancements to benefit the client’s network.
To achieve all project goals without affecting the client’s business, both systems executed in parallel for several months. This ensured the Service Parts Planning system performed as expected in the production environment with full volume, live data fed real-time from SAP ECC. During the parallel, the legacy system continued to drive the network while maintaining the Service Parts Planning system in alignment. The client and Neovia jointly conducted like-for-like tests to validate forecast statistics, supplier schedules, and deployment volumes across the network of facilities.
A second group of tests between the SAP Service Parts Planning production environment and Neovia’s Configurator technology validated greater than 99 percent alignment between the two. These tests, combined with the parallel testing, confirmed the legacy system, SAP Service Parts Planning, and the Neovia Configurator aligned as expected on forecast and inventory planning. The results were exceptional, giving Neovia and the client very high confidence in the continual ability to achieve business objectives following the transition to SAP Service Parts Planning.
The implementation was a resounding success, producing no major system outages or negative impacts to the client’s customer network. It also drove tremendous results for the client’s distribution network as seen in the following results taken Six months after go-live: 7.1 percent reduction in total supply chain inventory; 0.5 percent increase global network facing fill; 20 percent reduction in dealer back orders; 6.3 percent forecast accuracy improvement; and 30 percent reduction in air freight costs.
With the stable foundation of SAP Service Parts Planning, plans are in place to apply more of its superior functionality to drive even greater benefits throughout all areas of the spare parts supply chain.
By using Neovia’s Configurator in conjunction with SAP Service Parts Planning, the team delivered outstanding benefits for an already mature, highly performing supply chain.
Neovia’s successful implementation approach — installing SAP Service Parts Planning for all functions simultaneously at all facilities without costly trial and error — was only possible though the use of Neovia’s Configurator for SAP Service Parts Planning. Having proven the Configurator’s accuracy and high level of alignment with SAP Service Parts Planning, there is very high confidence in Neovia’s ability to optimize client networks going forward.
Tim Garfield, senior vice president of supply chain at Neovia. leads Neovia’s transportation and inventory optimization logistics services.