ERP Efficiencies

Software solutions focus on providing more predictability to random disruptions that impact inventory optimization

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Numerous challenges impact a shop’s productivity, but one of the most unpredictable is the supply chain. While ERP software can be a powerful tool for staying on top of inventory challenges, can it be used in a predictive manner to account for random disruptions that occur? With new data analysis and AI technology solutions that provide valuable insights, the answer seems to be a resounding yes.

The numerous and unknown variables that can impact the supply chain create a headache for those in charge of inventory management. For example, it would have been practically impossible for a shop to have planned for the surprise attacks by Houthi rebels on commercial vessels in the Red Sea earlier this year. The attacks significantly impacted the supply of aluminum and other metals, including copper, nickel and zinc. Not only were shipment delays considerable due to vessels avoiding the Red Sea and Suez Canal, but metal prices were also impacted.

From geopolitical conflicts and worldwide pandemics to rising energy costs and labor shortages, the supply chain can be disrupted drastically and, in some cases, without warning. While metal fabricators rely heavily on ERP solutions to make predictions about ordering to stay on top of inventory, how flexible is the software in managing unknowns?

A productive shop is one that replenishes its stock so downtime is avoided. Epicor’s Smart Software helps to take some of the uncertainty out of the supply chain challenge.

Greg Hartunian has put plenty of thought into that question in terms of supply chain and inventory optimization. He is the former CEO of Smart Software Inc., a company that in May of this year became part of Epicor where Hartunian has taken on the position of director of sales. Smart Software, founded in 1981, offers solutions that include statistical forecasting, demand planning, spare parts planning and inventory optimization. Smart Software has provided companies small and large with technology to improve forecast accuracy and optimize inventory levels.

“There is a hyper amount of uncertainty that exists,” Hartunian says in regard to disruptions and shutdowns that result in lengthened and unpredictable lead times. “Human beings like predictability. Most people just aren’t comfortable with the reality that things aren’t in their control.”

Fortunately, Epicor’s Smart Software offers some levity to the situation.

Penchant for predictions

It’s a fool’s errand to attempt to predict the future, but data analysis tools combined with AI technology offer meaningful inventory optimization assistance in drawing predictive assumptions out of the “noise.”

As an example, Hartunian says that manufacturers look for ways to extrapolate the future based on what’s happened in the past, and “we start to look for all sorts of ways to try to shape the future based on what we believe is going to happen.” While that’s possible “some of the time,” the reality is that these disruptions “throw a monkey wrench” into predictive models. Fortunately, ERP software can help as it can leverage what happened historically to better understand all of the possibilities for what might happen in the future.

“The way we approach the software is to use the randomness to our advantage,” Hartunian says. “That’s because we’re simulating the probability for each and every possibility. So, when these disruptions happen, it adds to the data input.”

He offers an example of a customer whose lead time history with orders from suppliers goes from a typical 45-day span of time for resupply to four-months or six-months spans to replenish their stock. These dramatic spikes in lead times “enrich the history that they now have,” and the data becomes part of the inputs that the software uses to generate the outputs.

Staying on top of the supply chain and optimizing inventory can be a challenge for fabricators, but utilizing an ERP solution provides valuable insights.

“One of the ways ERP can help businesses in a practical way is by leveraging the data to run simulations,” he says, “and that’s exactly what Epicor now has with its acquisition of Smart. The software is designed to practically enable planners or businesspeople to simulate future demand thousands and thousands of times as well as simulate future lead times.”

Does this mean that advancements in ERP have created a window into the future? No, predicting the future is always going to be a challenge and the best prediction still means, “there’s an equal probability that demand will be higher or lower than the forecast.” The problem and the solution, he says, is knowing how much higher or how much lower.

“When we have a lot of uncertainty in the form of demand history or in the form of lead time history,” Hartunian says. “We have this really rich data about lead time delays from examples like the disruption from the Suez Canal. That data, in turn, should be feeding every inventory model to simulate a probability of what might happen.”

Simulation success

By utilizing Epicor’s Smart Software, users can simulate all the possibilities and assign probabilities to each possible outcome. When the user does that at scale and in an accurate way – one that mirrors real-life uncertainty – Hartunian says they’re not just able to simulate what happened historically, but they can also simulate values that might not have ever happened before. Essentially, they’re simulating the randomness and gaining better insights to make fact-based decisions about how to protect against that randomness.

“ERP can help by making those types of accessible trade-off data available to end users so they can manipulate things like a stocking policy or a reorder quantity point,” he says. “Those are things that literally get ignored by so many companies. You don’t see anything in the media about the root cause being how companies choose to balance or reorder their inventory to contend with the randomness. Instead, they toss around phrases like, ‘well, we can’t get our inventory because of the supply chain disruption.’

“I’ve always contended that supply chain disruptions, variable lead times and unpredictable demand are supply chain facts of life,” he adds, “and it’s up to businesses to deal with those facts of life and set their policies accordingly. But, more often than not, the policies get ignored.”

The value in ERP, he says, is that it can help bring policy choices to the forefront of the decision-making process while also providing valuable trade-off data on how changes to those policies will influence risk and what it’s going to cost to reduce risk.

“That’s a critical piece of information,” he says, “and that’s what Epicor is able to do.”

Early implementation

There’s no doubt that searching for and implementing a new ERP solution is no small feat – it can be a big investment in both time and money. But, Hartunian says from his experience as a business owner, “when we’ve implemented tech, whether it be CRM tech or accounting tech, even if it was painful going through that process, we were always much happier once it was live and, of course, we wished that we had done it sooner.”

Like most software products, ERP software can come with a lot of bells and whistles that a small company might not need, at least not initially. Fortunately, Hartunian says implementing a Smart solution doesn’t require the user to “bite off everything all at once.”

Check out the video to see what is possible with the inventory optimization software from Smart Software, which is now part of Epicor.

“The nice thing about Epicor is we have a lot of add-on products,” he says. “Companies can start off with smaller projects to attack discrete supply chain challenges.”

For companies on the fence about whether to make the investment now or wait, Hartunian, again speaking from experience as a business owner, says that they shouldn’t wait, especially if they’re struggling with organizing data.

“You’re inevitably going to do it, and there’s never going to be a ‘good time,’” he says. “You’re always going to be happier if you do it with the right partner instead of waiting. You should be investing in technology because at the end of the day, you’re going to fall behind your competition every single time if you don’t make the investment.”

The Smart Software addition to Epicor can really help and drive a difference and in such a modern, high-tech way. By leveraging specific, practical applications of AI, such as inventory forecasting, a company’s inventory policies can be far more accurate, enabling them to make informed decisions about risk and reward. With a fact-based predictive inventory strategy based on probabilities and commensurate with the business strategy, businesses will be able to better contend with whatever happens next.

Epicor

Smart Software

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