There are a lot of inventory planning solutions from all around the world. Many are designed for large enterprise companies. They cost hundreds of thousands of dollars and are highly complex. Some are so complex a math or science degree is required just to operate the system. Others, at the low end, may only be point solutions for forecasting, as an example, or offer individual modules you need to buy separately. Several of these solutions include a forecasting capability either their own platform or from an included third-party provider. Most have you select the appropriate forecast method and require you to manually set replenishment levels, like min & max. How is this any better than using a spreadsheet?
How many offer real inventory optimization and why is this important? There are many reasons why inventory optimization is critical for conducting business in today’s ever challenging economic and consumer-oriented climate. An advanced supply chain planning system should also rationalize the inventory levels and investment in light of the expected demand and other variable conditions.
First, what is the cost of carrying, holding and managing an inventory? The costs for most items are steadily increasing, real estate costs and taxes are up and shipping costs are through the roof. Inventory optimization provides a great balanced inventory to meet expected demand, while reducing costs and better controlling spend for additional stock purchases. Planning in a timelier manner reduces the need for expediting orders in from vendors, which in-turn reduces the need for expediting shipments to customers.
Second, inventory optimization dramatically improves the financial performance of an inventory because buying and stocking are more in-line with expected customer demand. It helps to reduce and almost eliminate the future build-up of excess inventory and dead stock.
Third, there are too many known and unknown variables that can affect your inventory and subsequent customer service levels to manage properly. Just forecasting and planning your inventory leaves you wide-open to problems in meeting both your financial goals and customer expectations.