Multi Echelon Inventory Optimization (MEIO)
According to both Aberdeen Group and AMR Research, Inventory Optimization is currently the #1 supply chain initiative that companies are pursuing to improve efficiency and increase shareholder value. The reason is that it can quickly and effectively increase customer service levels while simultaneously lowering inventory levels over the entire supply chain. It is a relatively low risk high return project with a short implementation time since it can be easily added to your current ERP or Adexa suite of Supply Chain Planning solutions.
Adexa’s Inventory Planner optimizes your inventory investment, balancing working capital levels and customer service objectives. It goes beyond traditional inventory planning systems by understanding how to manage multi-echelon supply chains that can employ inventory pooling and postponement strategies.
ERP systems require inventory targets, safety stock levels, and order quantities as inputs, but provide no help in setting these critical values that drive the quality of the planning solution. With millions of possible SKU/storage location combinations, the best your planners can do is estimate these trade-offs at a high level and then apply broad brush rules to fill in the lower level data. The result is wasted money, poor service levels, or lower margins to get rid of Inventory. The Multi Echelon Inventory Optimization (MEIO) capability of the system automatically and expertly identifies these trade-offs, sets the key inventory parameters for each item and location, and feeds it into your current system.
You are probably aware of the pressures from your most demanding clients for 99% + reliability on orders – but you may not be aware of the price you are paying to achieve this using your current systems, in inventory and expediting costs.
The Inventory Planner is an important part of Adexa’s S&OP solution and can be easily added to your existing execution systems, which means that it can be put into place fast, without disrupting your operations or requiring large IT resources.
How it works:
Adexa’s Inventory Planner employs a powerful mathematical optimization algorithm to create a global inventory mix that achieves outstanding customer service levels while simultaneously reducing inventory. Using probability theory and distribution of usage at every level of the supply chain, reliable analytics define the precise relationships between inventory behavior and the target service level for each individual SKU location. The diagram below shows the relationship between cost and service level and how Adexa MEIO optimizes the inventory level at lowest cost level for a given service level.Behind the scenes, millions of SKUs are modeled against variables like volumes, lead times and lot sizes, to establish the right stock level and replenishment rate for each product in each location. The model handles a wide variety of challenges such as promotions, product phase in & phase out, product expiration and shelf life, end of season closure, and sophisticated product launch profiles.Adexa’s Inventory Planner solution dynamically generates optimal inventory targets and feeds them back to the Adexa supply chain planning systems or the ERP system. Now the supply chain, finance and marketing organizations have the right S&OP tools for setting global service levels and a powerful optimization engine for operationally delivering on their goals.
Benefits and Features
• Cost-based optimization to deliver highest service level at lowest cost
• Defines service levels at every level of supply chain from raw material to intermediate buffers and WIP to finished goods and even customer sites as well as supplier sites
• What-if capability to examine different scenarios for cost and delivery performance
• Works at different levels of aggregation or customer grouping. It can analyze by SKU and customer or by customer groups and product groups.
• Fast processing time allows quick results for fast decision making
• The data requirement is minimal and the implementation takes weeks
• It can be deployed as SaaS with little up-front investment
To learn more about Adexa’s Inventory Planning solution, please call our Sales Dept @ 310-642-2138 or email inquiries to email@example.com
This is a non-technical and quick read guide on Multi Echelon Inventory Planning. It takes a closer look at the issues related to inventory planning and the challenges it brings to managing your supply chain.
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Unless you have a robust inventory optimization engine, S&OP does not mean much. A key role of S&OP is to establish what is needed and how much to make. Inventory, or the right level of inventory, is the link. Having too much or too little can make or break a product launch or losing one or more customers. Learn how designing the right process combined with the latest technologies in inventory optimization can deliver the right level of inventory at every point in your supply chain.
This is an introductory video to show how randomness of inventory usage can be deployed in order to accurately estimate the relationship between cost and delivery performance.
This video contains a number of Adexa’s inventory optimization slides for your reference.