PLAN | Supply Chain Analytics

14

Inventory Optimization

Strategic stock management for cost efficiency

What Is It?

Inventory Level Optimization strategically manages stock to meet demand while minimizing costs.

  • Demand forecasting - Predict future requirements
  • Lead time assessment - Factor in supplier delivery times
  • Optimal quantities - Right amount at the right time
  • Cost balancing - Avoid overstocking and stockouts

Business Objectives

Cost Efficiency

Reduce storage, insurance, spoilage

Working Capital

Improve cash flow

Responsive SC

Adapt to demand changes

Customer Satisfaction

Product availability

Economic Order Quantity (EOQ)

The optimal order quantity that minimizes total costs:

Q* = √(2DK / h)
D = Annual demand
K = Fixed order cost
h = Holding cost/unit/year

Analytics Methods

EOQ Model

Optimal purchase quantity

Monte Carlo Simulation

Account for uncertainty

Safety Stock Calculations

Buffer against variability

ABC Analysis

Prioritize by value

Key Performance Indicators

Inventory Turnover

Frequency of stock replacement

Service Level

Meet demand without stockouts

Order Cycle Time

Order to dispatch time

Related Use Cases

Demand Forecasting Multi-Echelon Optimization VMI
All PLAN Cases

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