Artificial Intelligence for Inventory Optimization
RightOn enhances SAP IBP’s capabilities by providing artificial intelligence that simultaneously optimizes safety stock and cycle stock at maximum economic profit. This cycle stock is known as the Economic Profit Quantity (EPQ).
Economic profit (also known as Economic Value Added® which is trademarked by Stern Stewart Management) is the difference between the Net Operating Income After Taxes and the Opportunity Cost of Invested Capital. Economic profit is better suited for weighing the complex trade-offs associated with investing in inventory as part of a sales & operations plan, especially with potential changes due to Brexit and U.S. Trade/Tax policy changes. RightOn’s AI engine has the flexibility to include factors such as taxes, opportunity cost of capital, tariffs, duties, etc. within the computation of EPQ.
RightOn utilizes the Economic Profit Quantity as a benchmark to compare against actual performance. RightOn is then able to make the link between Economic Profit and settings in SAP IBP and/or SAP ECC.