Inventory Optimization

Keeping inventory investments in check while maintaining high customer service levels is a constant balancing act.  Without proper controls, excess inventory grows throughout your supply chain, locking up vital working capital that constrains your company’s growth.  Every day, the ERP system makes purchase order suggestions and manufacturing orders based on planning drivers such as safety stock, reorder points, and Min/Max levels. Ensuring that these inputs are understood and continually optimized will generate substantially better returns on your inventory assets.  Unfortunately, many organizations rely on rule of thumb logic,  institutional knowledge, and “one-size-fits all” forecasting logic that assigns all items within a particular group the same service level target. These approaches yield suboptimal policies that cause inventory costs to balloon and service performance to suffer. Compounding the problem is the sheer volume of data – thousands of items stocked at multiple locations means planners don’t have the bandwidth to proactively review these inventory drivers on a regular basis.  This results in outdated reorder points, safety stocks, order quantities, and Min/Max settings that further contribute to the problem.

Smart Inventory Optimization (SIO™) is available on Smart’s Inventory Planning and Optimization Platform, Smart IP&O.  It delivers inventory policy decision support and the means to share, collaborate, and track the impact of your inventory planning policy. This can help realize millions in savings by improving customer service and reducing excess stock. You can forecast metrics such as service level, fill rate, holding costs, ordering costs, and stock out costs. Users can identify overstocks and understocks, adjust stocking policies when demand changes, share proposed policies with other stakeholders, collect feedback, and establish a consensus inventory plan.  And unlike traditional inventory planning systems that rely on rule of thumb approaches or require the user to arbitrarily set suboptimal service level targets, Smart Inventory Optimization prescribes the optimal service levels for you.  Users can optionally assign service level constraints to ensure the optimization engine respects business rules. SIO provides the required inventory planning parameters for a variety of replenishment policies such as Reorder Point/Order Quantity, Min/Max, Safety Stock Planning, and Order Up to levels.