Inventory Optimization

Competition and globalisation has lead to proliferation of product variety and complex Supply Chain network. Deciding the optimal quantity of stock at various nodes in the Supply Chain network and retail stores is no more an art of guess work and intution. Organisations apply better inventory optimisation techniques and Technology to stock the right quantity of the products at the right location. Inventory optimisation is the art and science of finding the right quantity and location for stocking an item such that desired service level is obtained for minimum cost. Parameters like product cost, profit margin, expected demand, salvage value of a product are considered for inventory optimisation. This is done usually under stochastic demand where demand is considered as a probability distribution with a mean and variance. Inventory optimisation techniques and results will vary depending on the nature of the product, nature of the business, desired service level and many other parameters.