The Case for an Inventory Optimization Solution

Inventory Optimization solutions allow an organization to achieve a balance between the most efficient investment in inventory and highest customer service levels.

“One such misconception is that existing enterprise resource planning (ERP) systems can handle inventory management adequately. For small distributors not working in complex environments, this may be true. Most ERP systems do count and track inventory very well, and possibly even provide a basis for replenishment. However, such systems can lack the sophistication required to take inventory management to the next level, as well as the responsiveness necessary to handle rapidly changing market conditions. Nor do they have the depth or strength to evaluate and forecast inventory down to individual products and locations, which is essential if you're going to squeeze out additional costs and increase profits." (Source: S.Kilgore, Balancing Supply and Demand, Forrester Research, March 2002)

ERP vendors themselves have recognized this fact, and have recently started adding advanced planning functionality as separate extensible modules to their core product offerings. Inventory Optimization software recognizes that different industries have different inventory profiles and requirements. That fast moving retail items have different characteristics to slow moving items in automotive spare parts. Inventory Optimization software have this functionality.

Figure 5 shows how different inventory profiles have different requirements