Monday, July 22, 2019

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Inventory Optimization

Having either too much inventory or too little inventory is expensive. Controlling inventory carefully requires discipline and planning. In addition to capital charges, costs such as warehousing, obsolescence, pilferage, damage, insurance, administration, taxes, and lost sales make inventory management a critically important exercise for smoothing cash flow, meeting customer expectations, managing working capital in a better way, and improving the bottom line.

The right amount of inventory is imperative to ensure smooth running of supply chains. Reasons for having inventory include economies of scale, demand and/or supply uncertainty, replenishment lead time, seasonality and speculation, and meeting customer requirements.

Inventory management is about striking the right balance between two conflicting objectives: reduction in inventory and improvement in customer service level.

PMC's inventory optimization solutions provide the following features and benefits:


  • Multi-echelon modeling: Considers the effects of multiple inventory buffers along the supply chain in determining optimal safety stock and replenishment targets such as supplier to consolidation center, consolidation center to manufacturing location, manufacturing location to outbound distribution center, and distribution center to end customer.
  • Comprehensive constraint modeling: Models storage capacities, location based inventory budgets, and multi-level service contracts.
  • Flexible Service Measures: Models a mix of customer service measures, such as off-the-shelf order fill rate, or probability of stock-out service measures
  • Validation of operational feasibility: Provides full-featured supply chain simulation to validate the operational feasibility of scenarios by providing detailed information on expected behavior of key performance indicators before physically implementing them.


  • Reduces inventory assets while satisfying customer commitments
  • Improves service levels within inventory budgets and storage constraints
  • Quantifies cost implications of increased service levels
  • Smoothes production operations, minimizes stock-outs
  • Gains tighter control of total inventory; identifies and reduces dead inventory
  • Minimizes operating inventory with reduced safety stocks

PMC provides software and services with off-the-shelf Inventory Optimization products like Supply Chain Guru and Solvoyo. For detailed product information, on-line demo or presentation, contact PMC.

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