Describing Supplier Managed Inventory

Suppliers are responsible for maintaining the inventory and replenish it as needed. With buyer/supplier networked collaboration, increased visibility helps optimize inventory levels.

Prompt notifications and action times can be acquired increasing demand. Calculations of current and future inventory can be shared with suppliers.

Suppliers are able to commit to new quantities directly in the application and comply to minimum/maximum inventory rules. The order fill rates in demand – driven supply chains are improved.

For example, Mary is a buyer who would like to build a stronger relationship with her supplier to more smoothly and accurately control the availability and flow of goods.

She found out that by collaborating her business processes with her supplier that she was able to work more efficiently. She was able to maintain optimal inventory levels with minimum intervention and time spent monitoring in- and out-flow in warehouses. By sharing data over the network, all of her stakeholders can gain instant access to the status of materials needed for manufacturing.

Supplier-managed inventory takes the guess work out of inventory management. Inventory optimization is necessary for balancing capital investment and service-level goals over a large assortment of stock-keeping units (SKUs) while taking demand and supply volatility into account.

Let’s say, ABC Corporation has a large order for laptop computers and needs cooling units for the production. The forecasted amount that will be needed is 10,000 per week for the next 24 weeks. The suppliers are responsible for maintaining the inventory and replenishing it as needed. This can be better optimized through buyer/supplier networked collaboration. The buyer will be promptly notified in the increase in demand and address inventory projections. The supplier then updates the buyers scheduling agreement and replenishment purchase order. Finally the supplier creates an advanced shipping notification of the pending delivery once it is sent out.

Companies who use SAP Ariba’s solutions for supplier managed inventory automate:

• End-to-end collaboration
• Push-based replenishment and dashboard alerts based on minimum/maximum inventory policies
• Full insight into planned shipment calculations

With manufacturing planning visibility, a company can achieve complete supply chain visibility and equip it’s organization to work with multiple tiers of contract manufacturers and suppliers across key supply chain planning and execution processes. Suppliers can report the stock on-hand quantities in their inventory so buyers can use this information to better manage strategic components/ parts and proactively detect supply disruptions.

Manufacturing Planning Visibility has clear reporting of supplier component manufacturing quantities to provide visibility into the manufacturing process and proactively detect supply disruptions, including:

• Shipment quantities
• Firm receipt quantities
• Planned receipt quantities
• Projected stock quantities

Additionally, Reporting of stock-on-hand quantities and other key information, such as:

• Blocked quantities
• Quality inspection quantities
• Work-in process quantities
• In-transit quantities
• Scrap quantities

For example, the internal manufacturers of an organization are able to have more visibility into the supply plan generated from SAP Integrated Business Planning and SAP S/4HANA inventory target levels with the use of SAP Ariba Solutions.

This helps align and integrate the supply chain with manufacturing. The supplier managed materials replenishment is then basked on forecast and projected stock calculations. Productivity process time is improved as well as visibility through transaction automation and validation.