How Supply Chain Inventory Optimization Minimizes Costs

supply chain inventory optimization

Many companies struggle with supply chain inventory optimization. They need to overcome distributed data and inventory, navigate complex networks of locations, and manage configurations of thousands of parts. Without the right solution, they will blindly make decisions critical to their business operations. To navigate these obstacles, organizations need to:

  • Integrate inventory management to the planning process. Inventory management is the backbone of the supply chain inventory optimization processes. It is interdependent with sales and operations planning, supply action management, and master production schedule. Companies also need to integrate it to the technology solutions that power them.
  • Work with supply chain managers to find an ideal solution to inventory issues. Integration allows for cross-functional collaboration. The changes made in the inventory have a ripple effect on other supply chain functions. But as long as everyone collaborates and agrees on necessary trade-offs, conflict can be prevented down the line.

Integration and collaboration provide the necessary visibility across the end-to-end supply chain. They allow companies to see all aspects of the supply chain

How to Minimize Costs Associated with Inventory
Eliminating excess inventory is a continuing endeavor. It is an ongoing treasure hunt with rewarding results. To make sure companies reap its benefits, here’s what they should do:

  • Use historical data to predict demand. To continue improving their services, companies should collect data and use these predictions to optimize lead times and order quantities. Through this, they can replenish their inventory in an economical manner.
  • Simplify work processes. Overtime, many features are added to products and services to accommodate the wants and needs of customers and various markets. Each of these features can have tremendous impact on inventory costs.
  • Reduce multiple brands or suppliers of same items. If an organization uses two or more suppliers for the same item, the inventory costs will be higher than necessary. There is no need for back up suppliers, as long as they have a strong relationship with supplier and statistical data that prove their processes are capable of meeting needs.

While supply chain inventory optimization is not easy, it can free up working capital in times of growth, reduce costs, and ensure liquidity. It also provides a systematic and statistical way to cover supply chain risks effectively. It allows companies to make informed trade-offs between their service targets and inventory levels for maximum corporate performance. Ultimately, it improves inventory turns, reduce inventory holding costs, and increase customer satisfaction levels. Click here to find out how our solutions work.


Charlie Alsmiller

Throughout his career, Charlie Alsmiller has focused on customer problems in difficult industries such as Energy and Telecommunications. Prior to starting Appterra in 2005, Alsmiller was VP of Global Operations for Allegro Development, a leading provider of software for the energy sector. He has also served as president of OmniSpace Technologies, a leading SaaS provider that he founded in 1999. He spent over 10 years in the consulting world with Price Waterhouse and Deloitte Consulting, where he participated in a wide variety of projects for very high profile clients. Mr. Alsmiller holds a BBA from Baylor University in Management and Information Systems and a MBA from the University of Dallas in International Business. Specialties: Technology ventures, Enterprise Software, Contract Negotiation, International Operations, Private Equity, Product Management, Strategic Alliances, Software Implementation, Software Development

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