NexInfo is a consulting firm founded in 1999, specializing in operational excellence through business process and software consulting services, with a focus on areas such as supply chain optimization and inventory management. Robert Wang, a key presenter, is an expert in utilizing various analytic techniques to solve complex business challenges, having experience in management consulting and academia. The document discusses the significance of inventory management, types of inventory, measurement methods, and strategies for optimization to enhance customer service and reduce operational costs.

1. Inventory
Optimization &
Management
Presenter: Robert Wang
07/25/2019
@NexInfoSolution

2. 2
Reminder Submitting Questions

3. 3
Who Is NexInfo?
SUMMARY
 Consulting company focused on helping clients achieve Operational Excellence via an optimal blend of
Business Process & Software consulting services
 Deep domain expertise, including: Integrated Business Planning (IBP/S&OP), Enterprise Resource Planning
(ERP), Product Lifecycle Management (PLM), Customer Relationship Management (CRM), Enterprise
Planning Management (EPM), Human Capital Management (HCM), Predictive Data Analytics, Security, &
Business Transformations
 Founded in 1999 and managed by computer industry & business process professionals
 Clients include emerging companies and Fortune 1000 corporations
 Recognized in the industry, including features in Gartner Reports, The Silicon Review (50 Smartest Companies
of the Year 2016 and 10 Fastest Growing Oracle Solution Providers 2017), and CIO Review (100 Most
Promising Oracle Solution Providers 2015)
PARTNERS
CORPORATE INFO
 HQ in Orange County, CA with offices in Redmond, WA, Chicago, IL, Bridgewater, NJ, Dublin, Ireland, Chennai
& Bangalore, India
 Operations across the United States, Europe (Ireland, UK, Switzerland, Belgium) & India

4. Presenter
Information
 Name: Robert Wang
• Principal of Supply Chain Optimization, Nestle USA
• Adjunct Professor, Marshall School of Business at USC
 Experience:
In 2001, Robert joined the Business Analytics and Optimization Group at Nestle
USA. As a principal of the group, he is the mastermind behind many holistic
solutions for some very complex business problems. He specializes in using OR,
large-scale optimization, machine learning, statistics, visualization, and other
analytic techniques to solve business challenges. He has successfully lead the
design, development, and implementation of solutions for Supply Chain Network
Design, Inventory Optimization, Supply Planning, Deployment Planning, Network
Capacity Planning, Trade Optimization, and Transportation.
Robert also shares his expertise on campus as an Adjunct Professor at the
University of Southern California’s Marshall School of Business. Prior to joining
USC, Robert spent 7 years as a management consultant with Ernst & Young and
Deloitte & Touch.

5. 5
IT’S 2019, BUT INVENTORY ISSUES HAVE NOT GONE AWAY

6. 6
WHY HAVE INVENTORY?
1. UNCERTAINTY

7. 7
WHY HAVE
INVENTORY?
2. PRODUCTS MADE/BOUGHT/MOVED IN
BATCHES

8. 8
WHY HAVE INVENTORY?
3. SEASONAL DEMAND OR PRODUCTION CAPACITY
Demand
Week
Production Capacity

9. 9
WHY INVENTORY: 4. TRANSIT OR INCUBATION

10. 10
TYPES OF INVENTORY
 Safety
 Minimum required to maintain customer
service
 Cycle
 Created by production cycles due to
change-over cost
 Stock Build
 Due to limited production capacity
 Pipeline
 In-transit and quality hold
 Slack
 Unnecessary

11. 11
INVENTORY MEASUREMENTS
 Relative Measure
 Relative to the demand
 Can be used to compare among companies
 Common Measurements
 Inventory Turns
 Weeks (Days) Cover

12. 12
SAFETY STOCK
Safety Stock protects against uncertainty in demand and supply
 Uncertainty – demand forecast accuracy (FA), factory attainment,
lead time variance
 Risk – Customer service level
 Supply Chain Responsiveness (Also known as Replenishment Lead
Time) – planning time, frozen period, production, incubation,
transportation
 Note: longer the Replenishment Lead-Time (RLT), higher the
uncertainty

13. 13
INVENTORY IMPACT OF CUSTOMER SERVICE
0
1
2
3
4
5
6
88% 90% 92% 94% 96% 98% 100%
Case-fill rate (up to 99.99%)
Safety
S
tock
W
eeks
C
over
Based on
• 67% forecast accuracy
• 30 day replenishment lead-time
• no supply uncertainty
Key Take-away:
Linear up to 98%, then exponential after

14. INVENTORY OVER TIME
01/23/2025
NexInfo
14
Inventory
Month
Safety
Pipeline
Build
Cycle
Max Inventory
Min Inventory

15. 15
A DYNAMIC INVENTORY CALCULATOR
 Safety Stock
 Forecast Accuracy
 Replenishment Lead-Time
 Other Uncertainties
 Cycle Stock
 Product Cycle
 How do we know?
 Inventory Build
 Production Capacity
 How do we know?
 Pipeline Stock
 Transit / Incubation
 How do we know?
 Max Stock
 WSL
 Forecast Accuracy within WSL
Interactive Model:
InventoryCalculator

16. 16
INVENTORY OPTIMIZATION PHASES
 Limited change to the current SC environment (short-term)
 No change on Forecast Accuracy (FA), Replenishment Lead-Time (RLT), Service Level Target
(SLT), etc.
 Use inventory model to calculate the right inventory level necessary to maintain the
current service level.
 Low hanging fruit: about 5%- 10% inventory reduction
 Optimize current SC environment (longer-term, continuous process)
 Improve FA
 Optimize Customer Service Level
 Right size production capacity
 Reduce RLT by Increasing production flexibility and shortening supplier response time
 Reducing Cycle and Build Inventory by optimizing production plan
 Improve production attainment
 Minimize production setup cost and time
 Savings opportunity: 10% to 30% reduction

17. 17
OPTIMIZATION: CYCLE AND BUILD INVENTORY
 Minimize total costs impacted by production planning
 Inventory cost
 Production cost
 Costs of labor and over-time
 Setup or change-over cost
 Costs of shortage and freshness
 Master Production Scheduling Optimization (MPSO) Model
 Optimize production frequency and batch size for every product on a production line
 Production line capacity constrained
 Perform What-If analysis to optimize line capacity, over-time usage
 Evaluate options for production flexibility and capability

18. 18
SERVICE LEVEL OPTIMIZATION
 This trade-off could be
different for every different
product and industry
 A good inventory optimization
software should have this
capability
 A Tableau Model
 Cost vs Fill Rate Dashboard
 Sales Lost Factor
 WACC
 A Story Behind
 A new inventory initiative given
from the top for COF 99.5%
 Use case: education
Service Level
Costs 90% 95% 100%
Cost of Lost
Sales
Cost of
Inventory
Combined
Costs
Optimal Service
Level for Lowest
Costs

19. 19
OPTIMIZATION: NETWORK DESIGN
 Minimize Total Costs Impacted
 Transportation
 Inventory
 Fixed Distribution
 Handling
 Network Configuration
 Plant Direct
 DC
 Hub & Spoke
 Inventory Strategy
 Push
 Pull

20. 20
OPTIMIZATION: SUPPLY CHAIN COLLABORATION
 Think out side of the box
 Walmart Case for Retail Business
 DOT Food Case for Food Service
 Background
 Distributor for Food Service Industry
 Has its own SC network
 Value proposition
 Collaboration Opportunity
 Benefit Sharing

21. 21
NETWORK COLLABORATION
 Current State
 Future State
HUB/DC
Factory Spoke
Customer Store
MFG SC Network
Regional DC Forward DC
Customer SC Network
HUB/DC
MFG 1: FACTORY
Customer Store
Collaborative Network
Forward DC
MFG 2: FACTORY
MFG 3: FACTORY
Major
Inventor
y
Major
Inventor
y
Minor
Inventor
y
Minor
Inventor
y
Minor
Inventor
y
Minor
Inventory
Minor
Inventory
Major
Inventory

22. 22
Q&A

23. 23
Contact Us
HEADQUARTERS
615 W Civic Center Drive, Suite 350
Santa Ana, CA 92701
EMAIL
LetsTalk@nexinfo.com
TELEPHONE
(714) 277-3600
Bellevue, WA
Orange, CA
Santa Ana, CA
Bridgewater, NJ
Chicago, IL
Dublin,
Ireland
Chennai,
India
Bangalore,
India

24. 24
Appendix