Inventory optimization techniques
Inventory optimization (IO) now has a never-before-possible level of sophistication. At NeuSwyft we are well versed with following inventory optimization techniques:
Tactical deployment of safety stocks
Strategic use of inventory analytics
People, process and technology
Planners, buyers and inventory managers differ in their ideas on IO. Inventory optimization should consider following:
How comprehensively can these stakeholders understand inventory practices?
Mathematical relationship between inventory, service level and lead times
Uncertainty in inventory demand and in essence planning
New business processes or systems
Planning across multiple inventory storage points/warehouses
Collect input and provide output back into existing business processes
IO technology maturity Curve
Stage 1 – Single item/location
Define how much stock can be held that is sufficient to cover demand, lead times and ordering frequency. In other words, “just in case”. Run on the proviso of having 20 days’ worth of stock for ‘A’ grade items.
Stage 2 – Single site
Optimize inventory at a site. Optimal target inventory is calculated based on demand and supply uncertainty, lead time and required service level. Recommended optimal targets often less than existing targets but sometimes they peak. Senior management might decide that this is the stage where firm’s supply chain should go for global inventory optimization.
Stage 3 – Multi-echelon (MEIO)
Chain store will have more than one echelon. Application of research into real-world supply chains produced easy-to-use software solutions. Top priority is to manage demand volatility, need to respond to customer’s needs more rapidly. MEIO core competency of organization and drives strategic business planning.
Stage 4 – Strategic MEIO
MEIO produces info that we can be used for strategic analysis of future initiatives. Enough data to make strategic decisions on vendor & demand uncertainty, lot sizes, replenishment cycles. e.g. if a board wants to reduce inventory by 10%, supply chin team can show them which inventory can be reduced at least risk. IO allows organizations to deliver same level of service from lower inventory investment or raise level of service for same inventory. MEIO allows supply chain team to evolve to this new curve.
We have looked at all these aspects to leverage blockchain technology for use of inventory optimization. Please feel free to contact us for your inventory optimization needs or projects.