Analytical support of inventory management in SAP ERP

This paper is focused on analytical support of inventory management in SAP ERP. It is examined analytical support of inventory management in integrated information systems environment. In order to properly and effectively manage inventory a firm has to have a system of collecting, storing and analyzing business transactions data. The purpose of this paper is to examine next generation SAP ERP system and its capabilities in analytical support of inventory management. This paper starts with evaluation of different approaches to defining analytical support of management and comparison of most common Ukrainian definitions with Western ones. Then it is analyzed various paradigms of inventory management, including Logistics, Supply Chain Management and General Systems Theory approaches, Operations Research and Lean Manufacturing. As a preliminary conclusion, we suggest our own definition of analytical support of inventory management on the basis of literature analysis. We argue that analytical support of inventory management is a system of collecting, processing and analyzing of data, including forecasting, planning and modelling for supporting management decisions. This system supports accounting functions, such as receiving, issuing, scrapping and transfers postings, physical inventory and inventory valuation; planning functions, such as decisions on planning strategy, configuration and application of inventory replenishment methods, safety stock and lot sizes, and instruments for independent demand estimation; and analytical functions, such as analysis of planning accuracy, performance KPIs and inventory management optimization tools. Furthermore, analytical support of inventory management encompasses data processing algorithms of this information system. In the light of this definition the research proceeds with the description of SAP ERP functional modules and analysis of SAP ERP available instruments for inventory management. We explain the concept of Optimization Cycle in SAP ERP, it’s respective stages – planning, execution and analysis, and repetitive adjustment of the inputs for the next cycle. It has been suggested how the concept of Optimization Cycle can be outlined in terms of SAP ERP functional components. Finally, this paper is concluded with addressing the question of SAP ERP parameter configuration of inventory management process and showing that it is essential part of analytical support information system of an enterprise.