Silvon Develops Inventory Optimization Software for iSeries

by Alex Woodie

Business intelligence software vendor Silvon is set to ship a new application next month that helps manufacturers, distributors, and retailers keep inventory costs down. The new application, Inventory Performance Management, is designed to help companies minimize inventory, while continuing to meet performance objectives--a delicate balance, where cost savings can be found. The software runs on OS/400, Unix, and Windows and is the main enhancement in the Stratum 4.0 suite, which Silvon announced two weeks ago.

Inventory is one of the most expensive investments a company can make, so it's important to manage it wisely. Store too much of a given item on-site, and you're wasting precious space and losing cash. But keep too little stock on hand, and you risk losing sales and alienating customers. As with many things in life, there are a number of variables at play, and finding that happy medium can be a challenge. Luckily, there are number-crunching software programs that can do much of the factoring for you.

Silvon's new Inventory Performance Management module is one such program. The software is designed to take the guess-work out of deciding how much inventory and how much slack (or safety stock) you should allow yourself, based on your particular situation. The software features 30 templates based on industry-standard inventory-management algorithms that ride on top of Silvon's established multidimensional database.

"This is a separate engine that's integrated with the [multidimensional database] product that allows you to calculate, or optimize, the amount of inventory that you carry, on a set of characteristics: whether there's variability in the supply itself, the customer service level you choose, and the error in the forecast," says John Hughes, senior vice president of sales and marketing. "Those are big variables that cause the inventory to balloon."

Based on the input the user provides for these three questions, Inventory Performance Management spits out a number that you load into your master production-scheduling system for execution. The product actually does more than that--such as automatically notifying you if there's a sudden spike in supply or demand--but, in a nutshell, coming up with that magic inventory number is what Inventory Performance Management is all about.

"The trick," Hughes says, "is doing this across thousands and thousands of products, instantaneously. 'Let's put a business rule together; if condition A exists, notify somebody. If the trend in consumption increases by X amount, and if the inventory consumption increases by greater than 10 percent, relative to what it has been in the last year, alert me. Something is going on, and I probably want to change something.' "

Using the software effectively is not as easy as turning the dials all the way up, Hughes says. "People tell us they want a 99 percent customer service level. That's very high," he says. "We tell them, 'That's going to cost you a lot of money. You need to take the time to realize that a 97 percent customer service level may cost you 20 percent less in inventory than a 99 percent [level]." The customer service level is determined by how often a given piece of inventory is in stock.

Inventory Performance Management can be configured to work with a range of MRP and ERP systems, Hughes says. "We don't spend too much time working with their ERP systems, [but] we know what kind of file structure they need," he says. "We help folks determine when to stop ordering, when to stop buying. We help people plan their replenishment strategy."

The release of Inventory Performance Management, the seventh module in Silvon's Stratum suite, marks a continued evolution of Silvon into a developer of business intelligence software that's specifically targeted at tackling supply chain issues. In particular, Silvon aims to deliver software to midmarket manufacturers, with $100 million to $500 million in annual revenues, which Hughes identified as Silvon's traditional sweet spot. The other members of the Silvon suite include SRM Analytics (for Supplier Relationship Management), CRM Analytics (for customer relationship management), Marketing Performance Management, Sales Performance Management, Manufacturing Performance Management, and Profitability Performance Management.

Silvon worked with Texas A&M University's Supply Chain Systems Laboratory to develop the new inventory optimization software. Dr. Barry Lawrence, the lab's director, and an assistant professor, provided assistance in the software's use of the inventory optimization algorithms, Hughes says. "I was very excited to have the opportunity to review the design for this application," Dr. Lawrence says, "because it addresses inventory optimization with functionality and analytics rarely found in operational business applications."

Silvon is one of the main supporters of the university's Supply Chain Systems Laboratory program, along with IBM and J.D. Edwards. In February, Silvon officials attended opening ceremonies for the new program, which was also attended by iSeries general manager Al Zollar. Silvon and IBM worked to provide the lab with a new iSeries, for students to work with ERP and supply chain applications.

Stratum 4.0 also delivers several incidental enhancements, including the new iPlanner user interface, which Silvon formally announced this spring (see "Silvon Pushes Intelligence Down to the Browser with iPlanner" for more information). Stratum 4.0 and the Inventory Performance Management module should be available by the end of July. Pricing will range from $30,000 to $50,000. For more information, go to www.silvon.com.

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