TECHNOLOGY VALUE MATRIX 2016 - INVENTORY OPTIMIZATION TECHNOLOGY VALUE MATRIX 2016 - INVENTORY...

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Transcript of TECHNOLOGY VALUE MATRIX 2016 - INVENTORY OPTIMIZATION TECHNOLOGY VALUE MATRIX 2016 - INVENTORY...

  • Nucleus Research Inc. 100 State Street Boston, MA 02109 NucleusResearch.com Phone: +1 617.720.2000 1

    TECHNOLOGY VALUE MATRIX

    2016 - INVENTORY

    OPTIMIZATION

    A N A L Y S T

    James Cooke

    T H E B O T T O M L I N E

    Nucleus evaluated the usability and functionality of the most

    influential inventory optimization (IO) solutions in the market.

    The market for IO solutions continues to change as vendors add more

    prescriptive analytics for specific inventory attributes and work on improving

    usability with the addition of visualization, dashboards and notifications for

    supply chain planners to quickly spot and fix inventory problems. The leading

    vendors offer a high return on investment (ROI) by providing sophisticated

    solutions to streamline inventory across the entire supply chain while

    maintaining the correct amounts of stock to drive sales.

    

    M A R K E T O V E R V I E W

    More so than almost any other supply chain application, IO solutions can have a

    huge impact on a company’s finances. By minimizing inventory, this software frees

    up working capital for the business and, by guaranteeing that the company has the

    right stock on hand, it ensures availability of products, parts or materials to provide

    steady sales for the enterprise. Historically, these tools provide the highest time to

    value for companies with complex or global supply chains with large stock holdings

    and numerous stocking locations. In its research Nucleus found that companies

    applying IO tools can generally reduce inventory holdings in the range of 10 to 30

    percent.

    Although most supply chain professionals might not recognize it as such, IO

    software is really a form of prescriptive analytics. That’s because these applications

    P R O G R A M : S U P P L Y C H A I N M A N A G E M E N T R E S E A R C H N O T E  D O C U M E N T Q 2 8  F E B R U A R Y 2 0 1 6

  • February 2016  Document Q28

    Copyright © 2016 Nucleus Research, Inc. Reproduction in whole or in part without written permission is prohibited. 2 Nucleus Research is the leading provider of value-focused technology research and advice. NucleusResearch.com

    recommend where and how much stock should be held to meet a designated service

    level and to comply with specific inventory policies. The software itself relies on

    sophisticated algorithms and complex modeling to make their stocking

    determinations. Today multi-echelon (MEIO) functionality is standard fare in market

    leading solutions so that the software can adjust stock holdings holistically taking

    into considerations all sites across a network. Although robust solutions should

    automate the stocking and replenishment process to a large degree, they should

    also provide for scenario analysis so planners can weigh tradeoffs in costs and

    service when making a critical decision that can impact a company’s finances.

    Advanced functionality includes the use of machine intelligence to identify stocking

    patterns for seasonal products or new product introductions, which obviously would

    have no past sales history for an inventory benchmark. As more companies adopt

    demand-driven supply chains, leading solutions can take demand signal input to

    adjust inventory in near real-time.

    Going forward, Nucleus expects that top vendors will start paying more attention to

    usability. (Nucleus Research p217, 3 steps for IO vendors to boost midmarket sales,

    December 2015.) Because IO tools use complex algorithms and mathematical

    models, they often require extensive training for users to gain the benefits. If IO

    vendors want to expand their market, they are going to have make their tools easier

    to wield on the job. One reason is that small and medium-size companies don’t have

    the staff resources to dedicate specific users to an IO tool as large companies do,

    and, unless software makers simplify tool management, IO vendors won’t expand

    their customer base beyond huge corporations. In addition, even supply chain

    planners at large companies are pressed for time and need the ability to grasp

    meaning at a glance and take corrective action.

    Making IO software easier to use will require vendors to provide more in the way of

    visualization, dashboards and notifications. Although leading vendors are going

    down this path, many rely on third-party analytics applications, such as Tableau or

    QlikView, to highlight critical information visually. Nucleus believes that vendors are

    going to have to offer more embedded visualization in the applications to gain

    broader adoption.

    The market has also seen the emergence of cloud-based solutions targeted to

    budget-conscious companies in specific industries or with specific requirements like

    intermittent demand. These IO vendors provide an application with core

    functionality but lack the extensive sophistication found in the market leaders.

    These cloud solutions could expand the market because their offerings are more

    affordable for medium-sized companies.

  • February 2016  Document Q28

    Copyright © 2016 Nucleus Research, Inc. Reproduction in whole or in part without written permission is prohibited. 3 Nucleus Research is the leading provider of value-focused technology research and advice. NucleusResearch.com

    L E A D E R S

    Leaders in the 2016 edition of this Matrix include Tools Group, GAINSystems, JDA,

    Logility, Manhattan Associates and Terra Technology.

    TOOLSGROUP ToolsGroup based in Boston remains the market leader in MEIO software because of

    its continued investment in enhancing the functionality and usability of its solution.

    Its IO tool is part of the ToolsGroup Service Optimizer 99+ (SO99+) platform, which

    also has solutions for demand forecasting, demand collaboration, demand sensing,

    production planning and trade promotion optimization. ToolsGroup can deploy its

    IO application via the cloud or on premise and can link it to a variety of platforms

    including SAP, JDA and Oracle.

    The IO tool uses statistical demand and inventory models to assign different service

    targets to each individual stock keeping unit (SKU) by location. It also provides for

    stock mix optimization, the ability to set individual target levels in a category while

    maintaining a group target. It also does line fill rate to support supply chain

    I O VA L U E MAT R I X 20 1 6

    F A C I L I T A T O R

    C O R E P R O V I D E R E X P E R T

    L E A D E R

    U s

    a b

    il it

    y

    F u n c t i o n a l i t y

    JDA

    SAP IBP

    LLamasoft

    Infor

    SAS

    ToolsGroup

    GAINSystems

    Cast Flow

    Slimstock4R Systems

    Vanguard

    Manhattan

    Terra Technology

    Logility

    IFPA

    SAP EIS

    Blue Ridge

    One Network

    Kinaxis

    Oracle

    Smart Software

  • February 2016  Document Q28

    Copyright © 2016 Nucleus Research, Inc. Reproduction in whole or in part without written permission is prohibited. 4 Nucleus Research is the leading provider of value-focused technology research and advice. NucleusResearch.com

    operations striving to meet the metric of the perfect order. (Nucleus Research p50 -

    Anatomy of a Decision - 3 reasons for selecting ToolsGroup, March 2015) ToolsGroup

    has been far ahead of other vendors in using machine learning to calculate inventory

    for items with high demand variability and seasonality.

    Last year ToolsGroup continued to enhance its offering. It added a supply chain

    simulation tool, dubbed “Instant Replay” that allows supply chain planners to review

    historical events and compare multiple scenarios for each day by customer, SKU and

    location. (Nucleus Research p78 - Tools Group debuts Instant Replay, May 2015) It

    released a special algorithm to take into account the market value for life-cycle

    products in determining inventory holdings. (Nucleus Research p124 - ToolsGroup

    unveils algorithms for non-standard obsolescence, July 2015.)

    In the area of usability, ToolsGroup last year enabled the use of third-party data

    visualization tools into its dashboard home page. Although ToolsGroup offers its

    own report builder and provides visualization for core analytics and model building,

    it does rely on third-party tools, like Tableau and QlikView, for advanced

    visualization techniques.

    Finally, last year ToolsGroup positioned its solution to compete for omnichannel

    commerce when it inked a partnership with Retail Velocity for a demand signal

    depository - a database that stores and harmonizes store demand information from

    multiple parties. As more retailers and manufacturers adopt demand-driven supply

    chains, they will require upstream information in near real-time to determine stock

    holdings. Access to a demand-signal repository positions ToolsGroup