Inventory Optimization

Maximize service and minimize costs

Problem

Safety stock levels, reorder points, lead times, and order quantity directly influence the service vs. cost relationship. Every day, the ERP system makes purchase order suggestions and manufacturing orders based on these drivers.  Ensuring that these inputs are understood and optimized will generate better returns on 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  This results in outdated reorder points, safety stocks, order quantities, and Min/Max settings that further contribute to the problem.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) delivers inventory policy decision support and the means to share, collaborate, and track the impact of your inventory planning policy. 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, re forecast 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

 

Want to learn more about SIO?