Elements of Effective Inventory Optimization

Poor inventory planning is the most common problem we run into. Last month’s sales/usage is not the best predictor for this month. And ERP systems should not be mistaken for inventory optimization tools.

Some symptoms of poor inventory planning that you might recognize include low service levels, excessive slow moving inventory, high expedite costs, manual planning processes, and a general lack of faith in the plan. Furthermore these types of planning processes do not scale well with growing SKU counts, extended sourcing models, and longer lead times.

Inventory Optimization is the integration of disciplined planning processes and state-of-the-art technology

Implementing planning discipline is the first priority, and this often solves the problem. But if repeatable service and financial performance isn’t sustained with the current process and systems, then you should pilot inventory optimization tools to understand their value in your business.

These tools work well because they comprehend SKU supply and demand variation and provide both the SKU level inventory target needed for the planner as well as the aggregate view of the service-inventory tradeoff required of management.