German SMEs can easily release liquidity in the six-figure range from their warehouses.
At least that’s what Andreas Capellmann, Managing Director of the start-up company SCT GmbH, says. We asked him how he intends to achieve this with his software, which is designed to optimize the supply chain and reduce inventories in the long term.
Mr. Capellmann, how do you think you know that there is so much money hidden in the warehouses of German SMEs?
Capellmann: When it comes to sales and demand forecasting, SMEs in particular still have some homework to do. They simply don’t plan optimally according to actual demand. Often, even gut feeling plays a not insignificant role. This inevitably results in numerous inaccuracies, which ultimately lead to unnecessary excess stock. And these high stock levels cost money and tie up important liquidity. Most companies that work with our software have been able to make lasting savings of 20 to 30 percent on their inventories!
But don’t we need high stock levels in order to be ready to deliver even when demand is high?
Capellmann: That is still a widespread misconception.
With the right, well-founded planning, stocks can not only be significantly reduced, but delivery readiness can also be increased. This is not witchcraft. All you need is a solid database and the right tools.
Why do companies find this so difficult?
Capellmann: Adjusting the entire supply chain ideally is no trivial matter. The problem starts with the complexity of the master data: Items can have up to 130 logistical parameters. No planner can monitor this manually. Instead, precise, software-supported solutions that specialize in scheduling are required.
But can’t ERP systems also map this?
Capellmann: Yes and no. ERP systems originally have other tasks. Virtually all ERP systems are therefore not special systems for forecasting and scheduling. They can perform these tasks in a rudimentary way, but the result is far from optimal. There are practically no automatic mechanisms for the continuous optimization of scheduling parameters.
What exactly is the problem?
Capellmann: All ERP systems that we know of, for example, exclusively use methods that assume normally distributed demand. However, this is almost never the case in practice. This leads to systematically incorrect demand forecasts and inventory errors of up to 40 percent. In addition to the higher-level ERP system, more precise special tools are therefore also required in order to be able to plan optimally. These precision tools for planners are also known as advanced planning and scheduling software, or APS software for short.
What characterizes your APS software?
Capellmann: Our APS software is characterized by extensive simulation calculations that run automatically in the background and continuously optimize planning and scheduling settings and decisions. In this way, even less technically and professionally experienced users benefit from the high forecasting accuracy and scheduling precision. Companies can enjoy sustainably reduced inventories while ensuring the necessary delivery readiness.
Does the dispatcher no longer have to do anything?
Capellmann: Yes, of course. But our users are specifically alerted to the current need for action and benefit, for example, from the end-to-end visualization of demand forecasts and scheduling proposals: the effects of process or master data changes are interactively simulated and graphically displayed, which makes decision-making more transparent and easier. Many planning and scheduling processes can also be automated, rationalized and made reproducible with DISKOVER SCO. This ultimately leads to improved scheduling without major effort. Instead of constantly chasing after day-to-day business, dispatchers finally have more time for the important things; for example, more intensive supplier integration, which promises further savings.
You have opted for a rental license model and continuous delivery for your software. What exactly is this and what are the benefits for the customer?
Capellmann: Think of it like a cloud appliance that is installed on the customer’s premises in a highly secure manner. Customers save massive initial investments for runtime licenses and only have to pay a monthly fee for as long as they use our APS software. Thanks to continuous delivery, all new developments reach users in the shortest possible time. As direct user support, maintenance work and updates are carried out by our service center in Herzogenrath, the customer’s IT department does not have to provide any specialist support for the system or its users. This means that there are no hidden in-house costs, which many companies simply forget to include in their calculations when using alternative models.
But if the software continually costs money, won’t the savings made be used up at some point?
Capellmann: On the contrary. After all, inventory reduction is not a one-off effect, but an ongoing one. An example calculation: If you reduce your inventory by one million euros, you will save between 200000 and 300000 euros a year. These warehousing costs are made up of interest on the tied-up capital, costs for the provision and operation of storage space, shrinkage or damage to materials and insurance. Without optimization software, these annual costs would be recouped very quickly. And even if you only assume annual savings of 10 percent of warehousing costs, i.e. 100,000 euros, you will earn money month after month by using DISKOVER. And that’s not even taking into account other effects such as lower planning costs, improved delivery readiness and information capability.
Interview, Technology + Purchasing, issue 02/2014
By Kathrin lrmer and with Andreas Capellmann
