Business Policy Blog
Pursuing Best practices in demand planning, forecasting and inventory optimization
Inventory optimization has become an even higher priority in recent months for many of our customers. Some are finding their products in vastly greater demand; more have the opposite problem. In either case, events like the Covid19 pandemic are forcing a reexamination of standard operating conditions, such as choices of reorder points and order quantities.
To make the right decision, you’ll need to know how demand forecasting supports inventory management, choice of which policy to use, and calculation of the inputs that drive these policies.The process of ordering replenishment stock is sufficiently expensive and cumbersome that you also want to minimize the number of purchase orders you must generate.
When setting a target service level, make sure to take into account factors like current service levels, replenishment lead times, cost constraints, the pain inflicted by shortages on you and your customers, and your competitive position.
Once a customer is ready to implement software for demand planning and/or inventory optimization, they need to connect the analytics software to their corporate data stream.This provides information on item demand and supplier lead times, among other things. We extract the rest of the data from the ERP system itself, which provides metadata such as each item’s location, unit cost, and product group.