1. ATUL PATANKAR [ ASUG INSTALLATION MEMBER MEMBER SINCE: 2000 LINDA WILSON [ ASUG INSTALLATION MEMBER MEMBER SINCE: 1999 JUERGEN LINDNER [ SAP POINT OF CONTACT MEMBER SINCE: 1998 [ ] Maximizing Profits: Best Practices in Inventory Planning Using SAP Business One [ ASUG SAP Business One Summit 2010 Tom Glacken Senior VP Sales & Marketing Valogix LLC

2. [ Real Experience. Real Advantage.  Since 1988, the Valogix founders are one of the early innovators in inventory planning & optimization and have themselves been inventory planners and managers and business managers.  Founded in 2001 Valogix focused its attention on the growing needs both the small and midsize enterprise markets (SME) for similar inventory planning solutions.  SAP Solution Partner since 2004  SAP Global Gold Level Partner and Multi-year Award Winner  SAP Certified Integration status since 2005  Currently, customers and Value Added Resellers in 33 countries & growing Valogix Overview The Bottom Line: we help improve positive cash flow

3. [ Real Experience. Real Advantage. Managing a Tough Balancing Act Business Demands Decrease:  Inventory Costs   Inventory Costs  Shipments  L  Lost Sales Customer Demands Improve:   First-time Order Fulfillment   Competitive Price Position   Rapid Response

4. [ Real Experience. Real Advantage. Inventory Management Challenges  Recognizing “Demand variability”  Continual growth of new SKU’s  Long lead times  Difficulty in setting and maintaining accurate stocking levels  Dealing with critical “Stock-outs”  Low inventory turns  Excess and obsolete inventory  No ability to easily forecast more accurately  Wrong mix of in-stock items  Complexity in determining how much to order, when to order, and where to stock it

5. [ Real Experience. Real Advantage. Basic Replenishment Planning  Delivery Performance – “Safety Stock”  Local knowledge.  Sales and Market influence:  Seasonal Products  Slow Moving Demand  Hyper Growth from New Products Demand Influence … constant maintenance Max Inventory Level Reorder Quantity 0 Reorder Point Lead Time Lead Time  Estimate Maximum Stocking Levels  Estimate Reorder Points  Estimate Lead Times for replenishment delivery  Estimate Demand to establish Reorder The Basics… for each SKU in each Location Reorder Quantity 0 Demand Cycle Safety Stock Max Inventory Level Reorder Point Demand Cycle

6. [ Real Experience. Real Advantage. Steady Demand History Forecast What is the nature of history – is it trending? Is it seasonal? How much history do we want to use to determine the trend? etc. The difficulty with forecasting is predicting precisely which month will be a spike or a trough. Since the key objective of inventory planning is to protect against demand spikes the forecast serves as a starting good point, but not “the complete answer”. Result: Single Trend Forecast logic lead to huge overstock and understock inventory levels using this forecast as the basis for purchasing requirements Random Demand History Forecast Considerations for developing a forecast

7. [ Real Experience. Real Advantage. In both cases, the forecast trend line may suggest the forecast ramping up slightly at perhaps 110 in the first forecast month, 115 in the second and 120 in the 3 rd. But the quantity required to protect against spikes is vastly different in each. The objective is to look out over the planning horizon and determine the optimal stocking quantity required over the period to meet demand at a particular service level. The Valogix optimal stocking quantity (SQ) considers the randomness of each item. Random Demand History Forecast 110 115 120 Steady Demand History Forecast 110 115 120 Forecasting is only a starting point

8. [ Real Experience. Real Advantage. Measure the mean standard deviation quantity off the regression line and factor in the target Service Level. The Valogix Stocking Quantity (SQ) will protect against spikes to the extent that you set the service level over the planning horizon period Forecast = 30 SQ @ 99.9%= 43 SQ Safety Stock: Fill or Service Rate in SQ

9. [ Real Experience. Real Advantage. Exchange curve of service level vs. stocking quantity. In the example, a stocking quantity of 107 is needed to meet the desired service level of 90%. Optimization Exchange Curve – Safety Stock 9 As Service Levels increase Inventory costs grow rapidly.. Inventory Requirement Desired Service Level 9180% 10790% 12895% 16698% Sample Results

10. [ Real Experience. Real Advantage. Random Demand History Forecast Planning Horizon = 37 Days Optimal Stocking Qty at: 100% Service Level 85% Service Level 70% Service Level Supporting a Service Level of a true 100% has a price. Sometimes supporting a lesser service level since estimating the timing of a spike, can still support all or nearly all demand. Suggest starting at 100%. 110 115 120 123456 Lead Time = 30 Order Frequency = 7 weeks Planning Horizon = 37 Forecast over the PH = 120 Stocking Quantity = The quantity required on hand or on order to meet potential demand at a 100% Service Level = 150 @ 100% SL = 138 @ 85% SL = 115 @ 70% SL Using the Exchange Curve to Establish SQ

11. [ Real Experience. Real Advantage. Valogix Manages the Challenges Automates the inventory planning process:  Forecasting & Planning  Replenishment  Optimization Easy of Use and Affordable  Simple but effective – high degree of user acceptance  Exception based – alerts warn of potential future issues Provides visibility to all items and locations  Network balances details are on-screen for easy viewing Customer Master Warehouse Suppliers Remote Loc. 1 Week 2 Days 2 Weeks 11 Rolling Stock

12. [ Real Experience. Real Advantage. Starting with a dynamic rolling forecast, now we can layer over the Planning Horizon and Safely Stock/Fill Rate to determine the correct level of stock we should be carrying. Established SQ…Replenishment or Surplus? Rolling Dynamic Valogix Forecast Planning Horizon Service Level SQ Valogix Forecast Jan Feb March April May June July Aug Sept Oct 120 95 78 65 62 57 69 78 98 137 9090 40 358 90% 80% Lead Time 90 Days Order Frequency 30 Days Planning Horizon 120 Days SQ Service Level SQ Suggested level is More then what's on the self? : Replenishment POs Make Transfer SQ Suggested Level is Less then what's on the self? : Surplus Mounting Surplus Inventory Obsolete Inventory 358 Forecasted Demand over Planning Horizon 150 95% Dynamic Safety Stock

13. [ Real Experience. Real Advantage. Valogix Database SAP Business One Database New Buy Transfers Production Repairs High Moving Slow Moving Random Demand Seasonality Automated System Process Inventory Optimization Overstock analysis Spike Demand analysis Replenishment planning Order approval/placement Exchange curve analysis Exception Management Active Excess Obsolete Shortage Analytical  Dynamic  Adaptive  Predictive VALOGIX ® A DAPT Technology Lead Time Order Frequency Service Levels Qualifier Algorithm & Forecasting Analyzes History Selects Algorithm Displays which algorithm was selected High Moving Slow Moving Random Demand Seasonality Optimization & Rationalization System rationalize inventory mix Sets optimal Stocking Quantity (SQ) Lead Time Order Frequency Service Levels Inventory Analysis System checks inventory position versus SQ Determines items needing replenishment Analyzes Excess and Inactive stock Active Excess Obsolete Shortage Replenishment Creates Shortage & Excess Plans/Reports Sends POs, Transfers, Word Orders back New Buy Transfers Production Repairs Data Synchronization Valogix Advanced Technology

14. [ Real Experience. Real Advantage. 14 Product Demonstration See rapid value delivery in action.

15. [ Real Experience. Real Advantage.  Requires user to manually maintain stocking quantities (required, minimum, maximum)  Requires manual development and entry of forecasts (if desired for planning purposes)  Does not properly restrict supply and demand in multiple warehouse environments  Does not suggest Stock Transfers in Distribution Center environments  Does not create a single purchase order per supplier covering multiple warehouses How Valogix Enhances the MRP Functionality

16. [ Real Experience. Real Advantage. Eliminates the need to maintain Required, Minimum and Maximum levels in SAP Business One. How Valogix Enhances the MRP Functionality

17. [ Real Experience. Real Advantage.  Automatically plans for all locations simultaneously:  Create a single purchase order for each supplier  Consolidation of requirements for all locations  Ability to plan for free freight minimums  Initiate inventory transfers for items replenished from Distribution Centers  Issue production orders for multiple warehouses How Valogix Enhances the MRP Functionality

18. [ Real Experience. Real Advantage. Eliminates the need to enter a manual forecast into the MRP module. 12 month forecast is automatically created for every item at every location:  Using up to 48 months of sales history that can be imported directly into Valogix  Automatically selects best forecasting algorithm for each item based on historical demand pattern  Seasonal  Slow moving  Fast moving  Random How Valogix Enhances the MRP Functionality

19. [ Real Experience. Real Advantage. Selecting a warehouse within an MRP scenario only affects the initial quantities, it will not create a restriction for the other supply and demand inputs from other warehouses. How Valogix Enhances the MRP Functionality

20. [ Real Experience. Real Advantage. The MRP Module consolidates recommendations for purchase orders to cover requirements at multiple warehouses. All requirements are rolled to the default warehouse. How Valogix Enhances the MRP Functionality

21. [ Real Experience. Real Advantage.  Automatically plans for all locations simultaneously:  Create a single purchase order for each supplier  Consolidation of requirements for all locations  Ability to plan for free freight minimums  Initiate inventory transfers for items replenished from Distribution Centers  Issue production orders for multiple warehouses How Valogix Enhances the MRP Functionality

22. [ Real Experience. Real Advantage. 22 Value Delivered Cost Reductions Increases Efficiency - Sales & Customer Service 20% 15% 10% 5% 0% -5% -10% -15% -20% Reduced Expedited Shipping -6% Reduced Stock-outs -15% Inventory Reductions -20% Increase in Sales & Service 15% Productivity Gains 5% Annual Results: Purchasing Efficiencies 12% The Bottom Line: we help improve positive cash flow

23. [ Real Experience. Real Advantage. ROI & Productivity Results in Less than 3 months Inventory Reduction: 12% Planning Time Reduction: 85% Revenue Increase: 10% over previous year Back Orders: Decreased by 12% Inventory Turns: 3 Fold Increase Improved Customer Service: High fill rates of customer orders Time to Value: 10 - 11 weeks On-Going Results at 14 Months Inventory Reduction: 20% Revenue Increase: 10% Back Orders Reduction: 70% Inactive/Dead Stock Reduction: 60% Average Discount with Suppliers: 3% Studies Completed: February 2006 and June 2007 Customer Results “The time alone that Valogix saves me has more than paid for the solution and makes my job so much easier - the cost savings in the reduction of inventory and back orders is really just the gravy. Valogix has far exceeded our expectations. I can’t imagine planning without it.” ~Scott Toll, Translectric

24. [ Real Experience. Real Advantage. Manufacturer and Distributor of Security Products Real Customer Results: Inhep Digital Security “We’ve reduced our inventory value by more than 14,000,000 ZAR or 2,000,000 USD in less than 6months by improving our stock turns. Valogix planning is the backbone or our strategic decision making – from budgets to supplier management. Valogix forecasting has also helped us negotiate better prices with our suppliers, helping us drop our stock costs by more than 5% on our A items and 2% overall, directly earning us millions in gross profit.” ~ John McCluskey, Inhep Digital Security ROI & Results in Less than 6 months  Improved stock turns to reduce stock level 14,000,000 ZAR or 2,000,000 USD  Reduction of inventory by > 35%  Providing vendors with forecast improved volume discounts and delivery performance  Reduced stock costs(COGS) by > 5% on top items  Reduced stock costs (COGS) by > 2% overall  Automated reporting and processing improves staff productivity  Increased fill rates and reduce inventory overhead  Developing a program to reduce excess and inactive inventory

25. [ Real Experience. Real Advantage. Case Studies - $300,000 Savings / Pag e 25

26. [ Real Experience. Real Advantage.  Safely reduces inventory by 15% to 20%, or more...  Automated planning - saves time/reduces overhead  Improves item availability - satisfies customers and increases sales  Auto-Replenishment efficiency - saves time and money  Provides rapid return on investment Benefits Summary

27. [ Real Experience. Real Advantage. 27 ]  Thank you.