Inventory Optimization

Problem

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 items within a particular group the same service level target. These approaches yield sub optimal 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  This results in outdated reorder points, safety stocks, order quantities, and Min/Max settings that further contribute to the problem.

Solution

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 helping realize millions in savings by improving customer service and reducing excess stock. You can forecast projected metrics such as service level, fill rate, holding costs, ordering costs, and stock out costs. Users can identify overstocks and under stocks, reforecast optimal stocking policies, 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 sub optimal 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.

With Smart Inventory Optimization you can:

  • Identify where you are overstocked and understocked.
  • Modify  planning parameters based on your business rules, service targets, and inventory budget
  • Leverage the optimization logic in SIO to prescribe planning parameters and service levels for you.
  • Compare proposed policies to the benchmark
  • Collaborate and develop a consensus inventory plan
  • Automatically generate revised planning parameters as demand and other inputs change

Smart Inventory Optimization

Optimal Inventory Levels
Reduce Excess Stock
Improve Service Levels
Minimize Buyer Transactions
Maximize Return on Assets
Organizational Consensus
Balance Service Levels
Identify Stockout Risk
Identify Overstocks
No Finger Pointing
Operational Connectivity
Align Process with Strategic Objectives
Empower Team to “make it so”
Optimize as conditions change
Pass Results to ERP

Who is Inventory Optimization for?

Smart Inventory Optimization is for executives and business savvy planners who seek to

  • Yield maximum returns from inventory assets
  • Address the problem of highly variable or intermittent demand
  • Broker the service vs. cost tradeoffs between different departments
  • Develop a repeatable and efficient inventory planning process
  • Empower the team to ensure operational plan is aligned with strategic plan

What questions can Inventory Optimization answer?

  • What is the best service level achievable with the inventory budget?
  • What service levels will yield the maximum return?
  • If lead times increased, what would it cost to maintain service?
  • If I reduce inventory, what will the impact on service be?
  • If order quantity increases, what will the impact on service and costs be?
  • What is the order quantity that balances holding and ordering costs?

Inventory forecasting for the inventory executive

Smart Inventory Optimization empowers you to:

  • Predict service performance and inventory costs
  • Assess business impact of “what-if” inventory policies
  • Align inventory policy with corporate strategy
  • Establish an operational framework that guides the planning team
  • Reduce inventory and improve service
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