Managing the procurement and correct stocking levels of inventory is always a challenge for most organizations. Demand for an Item is sometimes unpredictable due to circumstances that might be out of an organization’s control. Higher consumption of an Item either for the production line, internal consumption, or shipments to customers challenges Inventory Managers to look at multiple and sometimes conflicting objectives for managing Inventory. They are asked to:
In most organizations, Management’s expectations are high and continuous on the above objectives as managing spend is critical while providing product at the right price and the right time is of utmost importance. Enterprise applications have built both simple and complicated algorithms to handle various aspects of Inventory management. The focus of this blog is on the Item substitution process and how substitutes can be the “hero” for an Inventory Manager in the fulfillment process. The big question one may ask is “If our planning and replenishment algorithms are correct, why do we need to provide Item Substitutes or alternates for fulfilling the original demand”? The answer quite obviously could be “to deal with unplanned stock shortages”. Yes, unplanned stock shortages are a major headache for Inventory Managers. Perhaps the last shipment from your Supplier had a high rejection rate due to damage in transit, or the Items received were not the quality expected. So stock shortages can happen at any time, and a savvy Inventory Manager would have a back-up plan should that occur. Developing an Item substitution plan for high demand Items can keep the fulfillment process rolling, the production lines moving and the revenue stream flowing. In addition to stock shortages, the substitute Items also serve other purposes such as:
Some Purchasing groups consider the development of alternate Suppliers who may provide suitable alternates for an organization’s key Items as one of the Key Result Area (KRA) for their staff. With such importance being attributed to finding alternate Items and Suppliers, we’ll discuss how the recent enhancements delivered in PeopleSoft Inventory helps provide organizations with stronger substitution capabilities when needed.
Item substitution has been a part of delivered Inventory functionality many years. It has been structured to allow organizations to define Item substitutions and pick those substitutes when the original Item requested is not available. The previous functionality allowed picking of either the original Item requested or the substitute Item but not a combination of both.
The recent PeopleSoft Inventory Partial Item substitution enhancement improves the functionality in the following areas,
Here are Use cases we considered and heard from our customers on how organizations could leverage this functionality,
Due to high demand due to social media and television news coverage of an anticipated potent strain of flu, the public is demanding flu vaccines in a higher than normal rate. A stock shortage could occur and once in place the Inventory system automatically allows issuing of the alternate Supplier’s vaccine without the nursing staff creating another stock request for more vaccine. The demand is fulfilled with both the original Item request from Supplier A, with the balance provided by the Substitution from Supplier B.
To accomplish this, the setup is simple. The stock for the old Item has a substitute of the new Item ID with a Backorder Rule that specifies no backorder for the old Item Id should be created. In this way, the system would issue the new replacement Item when the old Item’s stock is depleted and no new backorder demand back order is created for the old Item.
Of course, the warehouse Manager would then make the old Item ID’s status as ”Inactive” and no longer has to be worried about new demand created for the old model!
We have enhanced the legacy Pick Confirmation to provide the ability to have both the Original Item Demand and the Potential Substitute Item(s) displayed and available for use on the same pick line at the same time.
In FSCM Image PI-31, PeopleSoft Inventory enhanced the Partial Item Substitution feature by providing the option to create Item substitution analytics reports leveraging the Simplified Analytic functionality. This capability allows organizations to model analysis reports specific to their needs leveraging an out-of-the-box Query.
The Item Substitute Analytics tile can be accessed from the Procurement Operations Home page and reports help the organization to:
The scenarios are numerous where improved Item Substitution capabilities can “save the day” when demand fulfillment is of utmost importance in providing the best service. With improved substitution functionality, Inventory Managers could make the system work for them in managing fulfillment and the service levels customers have come to expect. It is also key in providing intelligence to the Procurement group as to what they may need to change in their procurement practices.
To learn more please view this VFO