Many companies experience low inventory turns but relatively poor customer service levels. This is especially true when the number of SKUs is high and product or component lead-times are long. In such situations, the optimal positioning of inventory in the supply chain can trigger a significant performance improvement by increasing customer service levels and at the same time increasing supply chain velocity. Such an improvement can have a major impact on the financial performance of the company.
Key questions
- What is the optimal inventory policy that minimizes inventory holding cost while maintaining or improving serviceability and financial performance?
- Where should inventories of each SKU be positioned?
- What is the optimal level of safety stock level for each SKU?
Inventory Optimization and SimFlex
SimFlex combines statistical inventory optimization algorithms with dynamic simulation. This methodology optimizes safety stock levels within the supply chain and validates the solution using dynamic simulation. The optimized inventory parameters can be imported back to the company ERP or similar system.