Manufacturing companies plan their material purchases for production with this AI.
Read why SAP Customers like Merck work with GenLots
Dear reader,
If you are looking for …
- Latest AI innovation for more sustainable supply chain management
- A way to rapidly decrease costs in upstream logistics
- An increased digitalization of your operations
- A better understanding of your supply chain triangle (costs, cash, and service)
- A product already integrated with your SAP system
…for your manufacturing company, then read on:
Why AI in upstream logistics and why now?
SAP customers generate 87% of total global commerce ($46 trillion) and 99 of the 100 largest companies in the world are SAP customers (SAP Corporate Factsheet, July 2022). SAP’s utmost priority is to connect these enterprises in a global sustainable business network.
As we partner with innovative startups like GenLots, we still put our customers first and we leverage the vast number of businesses worldwide that run on SAP to act smarter, more efficiently and more sustainably.
At the recent Viva Technology 2022 in Paris — Europe’s biggest tech event where business meets innovation, my team at SAP.iO (SAP’s startup program) was thrilled to host our partner startup GenLots and discuss on stage how they’ve helped SAP’s customer Merck, a large pharmaceutical company, adapt their upstream logistics (i.e. all operations related to the sourcing of goods destined to be assembled in production) to the challenges of today.
What is GenLots?
GenLots is an AI application helping leading manufacturing companies to achieve their sustainability and efficiency goals through the digitalization of supply and upstream logistics.
In practice, usage of GenLots looks like this:
Let’s say a manufacturing company uses Active Ingredient X in its production and knows the production requirements for this material for the 12 months to come, i.e. the dates on which it will be used and in which quantity. GenLots will automatically compute the Total Cost of sourcing of this material for the next 12 months, including the cost of the material itself (which can be influenced by quantity discounts), the cost of bringing a batch to the manufacturing site each time an order is placed (quality control or transport fees for example), and the cost of holding it until it is used in production (inventory cost).
According to these costs, GenLots’ AI will then optimize the timing and quantity of each order. It may group certain orders to reach a better price, reschedule some deliveries, etc. The savings associated to these changes can reach up to 10% of the Total Cost.
Now the planner knows how to order in the most cost-efficient way.
What if they want to explore other options for planning of this material though? Like changing the lead time, or the cost of quality control, or remove the rounding values for incoming batches? The user can simulate any of these options, and many more, in a few seconds to verify their impact on the ordering pattern of this material, as well as their impact on all costs involved. And now, the user takes an informed decision on how to improve purchasing data for this material — based on the results they obtained.
Better yet, the user can scale this scenario building capacity on a whole portfolio of materials. A great example here would be the scenario of introducing a CO2-consumption target associated to the future 12-months replenishment of a whole category of materials. From there, the user lets GenLots’ AI recompute the order plans, as well as the associated costs and savings, in function of this target.
At this point, the user can automate the entire above-described optimization process — thanks to the integration SAP/GenLots — or choose to perform and assess part of it manually in the GenLots UI.
Which problems is GenLots’ AI solving?
Challenge #1: Supply chain triangle when sourcing materials
Today, when it comes to ordering a particular material or component, there is no practical way of knowing what the Total Cost associated to the ordering plan of this material over the production horizon (usually 6 to 12 months).
Beyond this, even if the Total Cost was known, many conflicting factors are to be considered to get to the optimal decision. Here’s an example of trade-off: balancing the monetary potential of diminishing the number of incoming batches and CO2 impact with the necessity to maintain a low inventory. This is where the well-known supply chain triangle, i.e. the tension or equilibrium between cash, cost and service comes into play. And there’s no easy way around it.
Challenge #2: Outdated purchasing data
In a manufacturing company, even the most advance ones, purchasing data is not always optimized; typically, safety stocks for some incoming materials may have not been revised in months, while the demand for these materials (the production needs) may have considerably evolved.
In combination with the absence of visibility on costs discussed in point 1, this culminates in a situation of randomly ordering based on outdated data. Not cool.
Challenge #3: The (often forgotten) last mile in digitalization.
The level of digitalization of upstream logistics activities makes a difference. Many are still relying on excel macros or individual behaviours and decisions processes. With its intuitive and graphical interface based on your SAP system, GenLots creates a digital standard, to support and document every action related to purchasing materials for production.
Why is GenLots the perfect solution fit for SAP customers?
In recent years, pressure increased significantly on manufacturing companies to make their supply chain logistics resilient, agile and to implement operational excellence. SAP Customers benefit from the augmented connectivity possibilities offered by SAP S/4HANA. Through common APIs (available on SAP API Business Hub), the interconnection with a variety of value adding programs is eased on the newest version of SAP. Merck, as early adopter of S/4HANA for example, has already widely rolled out this version and can now count on it to accelerate the adoption of GenLots.
GenLots, as well as of other connected applications featured in SAP Business Technology Platform, and accessible through SAP Store, highlights the business value of switching to SAP S/4HANA.
Interested to elevate your upstream logistics just like SAP Customer Merck did? Let’s talk.
Reach out to Arnaud at arnaud@genlots.com in case of questions or interest in collaborating.
A big thank you and shout out to Gianpiero Lorusso, Head of Upstream Logistics for the Healthcare Division of the Merck Group, an SAP customer, and Arnaud from our partner startup GenLots. Here is to our successful collaboration!
About
GenLots
As one out of six startups who made it into the SAP.iO Accelerator Program in fall 2021, we are proud to announce that Genlots is now available on SAP Store: Find us on the SAP Store
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