All You Need to Know About Inventory Optimization

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Frequently Asked Questions

Inventory management software (also called inventory planning software) goes beyond simple record-keeping to provide optimization, simulation and analysis you need to make better supply chain management decisions.

Inventory management software can reduce inventory costs and improve customer service at the same time. It secures that the right amount of stock is in the right place at the right time and at the lowest possible cost. It has become a critical tool in many organizations as inventory carrying costs can be reduced by upwards of 30%.

Inventory management software typically includes forecasting and replenishment modules. Forecasting helps you balance target service level or expected demand with inventories kept in stock and incoming supplies. Replenishment helps determine the safety stock levels that are needed at points along the distribution chain to satisfy orders at a given fill rate. A subset known as inventory optimization software employs complex algorithms to recommend what to stock and in which quantities for meeting demand across the entire supply chain or at a specific location.

Inventory management software is available standalone or in ERP and supply chain management (SCM) suites. However, not all solutions includes inventory optimization and product life-cycle tracking which are key components for successful inventory management.

The broadest definition of the term “inventory management software” would have to include Enterprise Resource Planning (ERP) and Material Requirements Planning (MRP) legacy software that records basic data on inventory. Advanced Planning and Scheduling (APS) tools help manage the raw materials and components used in manufacturing, and Warehouse Management Systems (WMS) have analogous features for warehouse inventory management. Today, the term “inventory management software” denotes a distinct category of specialized tools for collecting and analyzing inventory-related information for planning purposes.

A warehouse management system (WMS) primarily aims to control the movement and storage of materials within a warehouse and process the associated transactions, including shipping, receiving, and fulfillment. It controls and optimizes the movement, storage, and tracking of inventory in and around a warehouse. In contrast, inventory management software optimizes what products to keep in stock and in which quantities. Inventory management systems optimize the safety stock, reordering points and the economic order quantities (EOQ) of inventory to ensure that future demand can be meet according to plan.

There are very few projects that can increase profitability as much as inventory management in companies where the inventory or product flow is the core business.

The quickest return on investment often comes from lower carrying costs. Below is a direct quote from an EazyStock customer outlining their operational and financial benefits of optimizing their inventory:

We reduced our stock levels by over $1 Million, corresponding to 23%, reduction in inventory while at the same time improving our service level by 13% points

Svante Stenström, Supply Chain Manager at AxIndustries.

3 main advantages optimizing inventory management with software:

  • You can reach the target service you are aiming for within 1 replenishment cycle.
    Higher service = fewer stock outs = higher sales.
  • It reduces capital tied up in stock and frees up cash flow.
  • It saves time and money by automating the procurement and replenishment processes.

Integration, data quality, and training are usually areas that require attention.

Inventory management software must be integrated into existing ERP systems, often at great expense. Evaluate different system provider’s capabilities to integrate or transfer data between your ERP and the inventory management solutions. Often an implementation project takes 3 to 6 month but with EazyStock, you can get started with a simple Excel import and export data transfer. We have you up and running in days and your business will get value from the system within a week.

Users often need training in inventory management methodologies before being able to handle the software. Just because the functionality in a system is advanced, it doesn’t mean that the user interface and usability requires a Ph.D. degree. We believe that every manufacturing and distribution company keeping stock should have access to a great inventory optimization tool that is easy to understand and maintain. This is why we have developed EazyStock.