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Inventory Optimization Services

Whenever delivery time is less than the manufacturing and procurement lead time, inventory needs to be maintained in the supply chain. Depending on the manufacturing strategy, this inventory could be of finished goods, components and intermediate items or raw materials. Organizations incur heavy costs on inventories such as - interest on working capital, insurance, storage, handling etc. Hence, proper control and management of inventory is always a top priority for organizations.

In a make-to-stock scenario, finished goods inventories are maintained. These inventories are managed using either consumption-based inventory policies or demand forecast to create an inventory for each period. Examples of inventory policies are reorder point, min max levels, base stock policies, periodic review policies etc. Similarly, these also cover economic order quantities under different scenarios e.g. quantity discounts, production rates, permitted backorders etc. Alternatively the demand for each period is forecasted and made available as inventory at the beginning of the period. Various forecasting methods like simple moving averages, weighted average are typically used. In an assemble-to-order scenario finished item forecast are used to run MRP and generate demand for components and raw materials, which are then used to plan the inventory for each period. These are ordered in pre-defined lot sizes to minimize set ups and ordering frequency.

In addition to planned inventory for consumption, safety stock is maintained to buffer the variability in demand and supply as well as forecasting errors. There are various methods to calculate safety stock depending on the business scenario.

Essentially the success of inventory management depends on two factors:

First,selection of the right method e.g. inventory policy,forecasting method, MRP lot sizing method,safety stock calculation method,periodic review etc.

Second, the values used in these methods e.g.reorder point,exponential smoothing factor, no. of periods to be averaged, periodic review intervals etc.

Solvop uses its powerful optimization and simulation engines to help the companies with these decisions. The decisions could be then implemented in your ERP system, if available. Some of the advanced methods not available in the ERP can be executed by Solvop as a periodic service.

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Inventory Optimization Services

Essentially the success of inventory management depends on two factors:

First,selection of the right method e.g. inventory policy,forecasting method, MRP lot sizing method,safety stock calculation method,periodic review etc.

Second, the values used in these methods e.g.reorder point,exponential smoothing factor, no. of periods to be averaged, periodic review intervals etc.

Solvop uses its powerful optimization and simulation engines to help the companies with these decisions. The decisions could be then implemented in your ERP system, if available. Some of the advanced methods not available in the ERP can be executed by Solvop as a periodic service.