Inventory Optimization Archives | ToolsGroup

Inventory Optimization

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Inventory Management vs. Inventory Optimization: What’s Wrong with ABC Inventory Classification?

15 March 2023

ABC inventory classification has been around so long that most planners just assume it’s the only way to segment your inventory. In fact, it’s not. And it’s not even nearly the best way. It’s actually a throwback from technology developed[...]

25 October 2022

Seasonal Inventory and 7 Ways to Manage It Effectively

My eight-year-old self counted down the days to October 1 – the day my mother finally let me bedeck her spotless house with cobwebs and window clings of ghosts and goblins. It never occurred to me then that someone had[...]

The Top 15 Omnichannel Retail Trends to Watch in 2023

Your digital and brick-and-mortar sales channels aren’t operating in separate vacuums. In fact, according to Harvard Business Review, 73% of shoppers prefer shopping via multiple channels. In a world where customer expectations are higher (some food delivery services actually put[...]

Retail Returns: The Key to Driving Business Growth

Retail returns occur when a customer returns the purchased items to a seller in exchange for a refund, store credit, or a similar product. Returns come with plenty of challenges around logistics, inventory, and predicting volatile sales trends. Yet, in[...]

2 December 2021

Success Strategies for Demand Forecasting in Supply Chain

There’s been a lot of change in how we view supply chain demand forecasting: we moved from a focus on supply—what and how much to supply or replenish—to the demand-driven supply chain, which placed too much emphasis on the intermediate[...]

23 November 2021

7 Ways Businesses Can Manage Supply Chain Shortages in 2022

With 2021's holiday shopping season behind us, supply delays, logistics constraints, and inflation loomed over shoppers and retailers—and the manufacturers and distributors who keep them in supply. The supply chain shortages from 2021 remain the story of our lives today,[...]

Here’s How to Measure Inventory Health

Looking for a relatively quick way to measure inventory health? It all starts with a demand-driven approach. Even though we’re talking about inventory, we first have to understand customer buying behavior—and how that then translates into inventory requirements. As a[...]

Multi-echelon Inventory Optimization (MEIO) vs Inventory Optimization

The subway system is the lifeblood of New York City, pre-COVID carrying an average of 5.5 million people per day in 6,684 cars across 472 stations. Each station is part of a larger system and operates on a set schedule[...]

Fashion Industry Challenges Require Elegant Demand Planning

When you’re perusing luxury handbags online, or testing which cocktail dress suits you the best, you probably don’t pause to consider all the supply chain complexities and analytics required to ensure the fashion items you’re craving are in-stock. While sophisticated[...]

23 February 2021

Inventory Planning vs. Inventory Optimization: What’s the Difference?

What’s the difference between traditional inventory planning and inventory optimization? Anyone can come up with a plan. The real challenge is making sure it’s a good plan. Optimizing your inventory is a different beast than simply planning your inventory. If[...]

Five Things You Need to Know about Inventory Optimization in the Digital Age

With all the buzz around digital transformation, someone peering in from outside supply chain may assume most businesses have already digitized essential tasks like inventory planning. The reality is that this transformation takes time and a change of mindset. It’s[...]

The Absolut Company: Balancing Service and Inventory Creates a Delicious Mix

The world’s #2 selling vodka brand leaves nothing to chance when it comes to quality and sustainability. Here’s how they teamed up with ToolsGroup partner Optilon for a seamless supply chain planning process. With continuously shifting consumer preferences and brands[...]

How to Make Supply Chain Complexity Work to Your Advantage

With supply chain complexity increasing at an unprecedented rate, perhaps the biggest challenge for businesses is figuring out how to navigate this uncertainty to deliver service profitably. Amazon sells more than 3 billion products through 11 different country marketplaces globally.[...]

5 February 2019

Design, Operating and Situational Inventory Trade-Offs

Gartner analyst Paul Lord has developed a framework to better understand inventory trade-offs by categorizing those decisions according to the objectives they are meant to achieve: structural, operational and situational. Many companies struggle with decisions such as “How many days of[...]

13 November 2018

Why Probabilistic Forecasting Is Better for Inventory Optimization

Last month we published a primer on probabilistic forecasting, an alternative to deterministic or ‘single number’ forecasting. In this post we’ll explore how probabilistic forecasting not only creates better forecasts, but also improves inventory optimization by improving the stock levels[...]

25 September 2018

Balancing Service Levels and Supply Chain Costs

Editor’s Note: Last year ToolsGroup became Microsoft’s partner for Multi-echelon Inventory Optimization (MEIO) in Industrial accounts. We collaborated on a blog about how to solve the often difficult challenge of balancing service levels with supply chain costs. You can see[...]

How Manufacturers Optimize Their Inventories

Editor’s Note: Microsoft’s Colin Masson, Global Industry Director of Manufacturing Solutions, sat down with me to discuss how manufacturers optimize their inventories. You can see a longer version of the interview on the Microsoft website or my slightly abridged version[...]

Still Managing Your Inventory with Spreadsheets?

Most companies are still trying to use Excel to optimize their stock levels, managing inventory with spreadsheets. Supply Chain Insights’ 2018 Inventory Optimization Technologies Study suggests the number may be as high as 75%. These companies struggle to meet tight service[...]

Segmenting Your Inventory by Gross Margin and Demand Variability

Gartner Research analyst Paul Lord has developed a thought-provoking approach (shown in the below diagram) for tailoring supply and inventory tactics to different inventory segments based on gross margin and demand variability. Traditional ABC inventory models segment inventory into A,[...]

Four Ways Inventory Optimization Can Address Tighter Supply Constraints

As the (U.S.) economic expansion enters its ninth year, supply constraints are showing up in supply chains. The Wall Street Journal recently advised “In the battle for economic supremacy, investors should quickly be realizing it’s increasingly about supply, not demand.”[...]

Transforming the Manufacturing Supply Chain with MEIO

Editor’s Note: Last year ToolsGroup became Microsoft’s partner for Multi-echelon Inventory Optimization (MEIO) in Industrial accounts. Microsoft’s Bill Moffett and I collaborated on an introductory blog on MEIO for manufacturing businesses. You can see Bill’s version here on the Microsoft website and[...]

Three Key Themes in the New Inventory Optimization Vendor Ranking

The 2018 Nucleus Research Inventory Optimization (IO) Value Matrix Report has just been released, and analyst Seth Lippincott identifies the latest technology trends, ranks top inventory optimization solution providers, and describes the strengths and weaknesses of each vendor. Nucleus positioned[...]

Segmenting Your Spare Parts Supply Chain for 3D Printing

From warehouse robots (very real) to equipment that you control with your mind (in the labs), new technologies appear so regularly that it can be hard to separate real from science fiction. But in the spare parts business, 3D printing has become “here and[...]

Three New Ways Retailers Can Improve Inventory Performance

Many retailers consider competing against Amazon their biggest challenge. While the impact of Amazon is real, it is only a thread in the larger retail competition tapestry. Amazon offers breadth, but brick and mortars offer “now”, and a tactile consumer shopping[...]

23 January 2018

Why You Should Modernize Your Spare Parts Planning

There’s untapped cash and profits in your spare parts business. Aftermarket parts is a big net margin producer for many manufacturers, and yet service levels and inventory in these operations are often woefully sub-optimized (See CapGemini statics above). A recent in[...]

17 January 2018

Forecasting the Long Tail and Intermittent Demand

Items with intermittent, unpredictable or "long tail" demand are a growing part of business. You don’t have to be an internet retailer like Amazon to see it. Companies are dealing with more slow moving items with unpredictable demand patterns. This[...]

14 November 2017

What’s Wrong with Strategic Network Design?

The problem with strategic network design is when it accounts for service time but not service level. That is, it accounts for the time it takes to serve customers, but not the probability that a certain percentage of the orders will be delivered within that time. It optimizes[...]

31 October 2017

Inventory Can Be Scary

“Your inventory problem is scary because you’re selling out before you can make new items to meet demand”. That’s what Robert Herjavec from the TV show Shark Tank said to an aspiring clothing retailer after their pitch in Season 8.[...]

The Best Way to Set Inventory Targets?

Gartner’s insights are quite good and it’s not often that I disagree, but on the topic of setting inventory targets I have to differ with the conclusions of a recent report, “Cover Considerations — How to Optimize Retail and Consumer[...]

Demand-Driven Supply Chain Planning in a Push Business

A question we hear often is “How can I have demand-driven supply chain planning in a push business? Demand-driven seems more appropriate to a pull strategy, the opposite of a push strategy. How can they coexist?” To answer the question[...]

Nucleus Pinpoints Inventory Optimization Trends and Solution Providers

The Nucleus Research Inventory Optimization (IO) Value Matrix report was just released, identifying the latest inventory optimization trends, top inventory optimization solution providers, and the strengths and weaknesses of each solution provider. Nucleus positioned 17 vendors in its value matrix[...]

Industrial Supply Chain Planning is Different. Here’s How.

Two recent benchmarking surveys, one by Gartner and another by ToolsGroup, identified specific issues that make industrial supply chain planning different. Here’s what they discovered. Gartner surveyed 112 industrial supply chains across North America, Western Europe and Asia/Pacific. They found a median[...]

25 October 2016

Intermittent Demand is Not Unforecastable Demand

Has this happened to you? Your forecasting or demand planning system says an SKU is “unforecastable” because demand is too small and intermittent. If it happens infrequently, your intermittent demand might not be a problem. But if it’s happening regularly,[...]

When SMBs Hit the Inventory Planning Complexity Wall

Inventory planning is especially important to small-to-midsize businesses (SMBs). Nobody wants to tie up more working capital in inventory than necessary, but SMBs typically have a higher cost of capital, so it’s more expensive to fund excess stock. And if a company is[...]

Is Inventory Optimization a Key to Omnichannel Survival?

For multi-channel retailers, it’s getting increasingly difficult to survive in “the Amazon jungle”. Bob Ferrari of Supply Chain Matters recently pointed to The Sports Authority bankruptcy as one indication. As Amazon invests relentlessly to boost its agility and drop its costs,[...]

What’s Wrong with Aftermarket Parts Supply Chain Planning?

This is actually a trick question. What’s wrong with aftermarket supply chain planning really has nothing to do with planning, but with management expectations. This is a case of management not expecting enough from their business. There is a reoccurring conversation in[...]

The View from Finance: Freeing Up Cash with Inventory Optimization

If you (or your boss) are measured by your company's Return on Invested Capital (ROIC) or a similar metric, then you want to turn assets into cash. Whether the message comes down from the Chief Financial Officer (CFO) or even[...]

What’s New in Inventory Optimization?

Principal Analyst James Cooke of Nucleus Research just published his 2016 Inventory Optimization Value Matrix which highlights this year’s key trends, including functionality and usability. The report is available below and the following also includes some comments from a recent[...]

10 November 2015

Five Types of Inventory Optimization You Should Know

[caption id="attachment_7932" align="aligncenter" width="541"] For inventory optimization, optimizing inventory configuration is often the predominant issue in most manufacturing environments, versus optimizing inventory policy in most distribution environments[/caption] Here are five types of inventory optimization that you should be aware of if you[...]

3 November 2015

When is Inventory Too “Lean”? Finding the Right Balance

I learned about “lean manufacturing” (or simply “lean”) back in the 1990s when I met James Womack and read his book “The Machine that Changed the World”. Based on MIT's five-year, fourteen-country study – one of the largest and most[...]

22 September 2015

How Safety Stock Absorbs Demand Volatility

Demand volatility is cited by Gartner, IDC and other analyst firms as the number one obstacle identified by corporate executives to achieving their supply chain goals. But companies can overcome this obstacle by positioning the right safety stock inventory across the supply chain[...]

1 September 2015

Inventory Obsolescence: It Can Get Complicated

It’s hard to get around inventory obsolescence. Derived from the Latin verb obsolesere—to grow old—most products in the marketplace grow “long in the tooth” at some juncture in their life cycle. Shorter innovation cycles, multi-channel complexity, and long-tail stock-keeping units[...]

Plan or Perish: Cold Chain Logistics

If it’s hot in August, you can duck in and out of air-conditioning. But that’s not the case with goods in the supply chain that always need to be kept cold. Cold chain logistics pose a major execution problem—maintaining product integrity[...]

Managing the Long Tail of the Supply Chain Part 4: Five Takeaways

Our last three posts covered the key messages of the recent Consumer Goods Technology (CGT) web seminar about long tail demand called “Driving Results despite Item Complexity". Blog 1: Lora Cecere discussed the drivers of increasing demand volatility, the pain and risk it[...]

Managing the Long Tail – Part 3: How Dart Achieved a 99.6% Service Level

After analyzing the long tail supply chain challenge in the last two blogs, this week we see how Dart tackled their long tail and achieved a 99.6% service level with about 20% less inventory. This story starts in 2012 with Dart[...]

The Long Tail of the Supply Chain: Part 2 – Pareto is Dead

In last week’s post about the long tail of the supply chain, Lora Cecere emphasized the need to forego traditional forecasting and replenishment strategies in the long tail. In the recent Consumer Goods Technology (CGT) web seminarentitled “Driving Results Despite Item Complexity”, one slide[...]

Managing the Long Tail of the Supply Chain: Part 1

This month we will dedicate four posts to an important but not well understood supply chain planning phenomenon called “long tail” demand. Consumer Goods Technology (CGT) recently hosted an excellent web seminar on this topic entitled “Driving Results Despite Item Complexity”.[...]

Adapting Demand Forecasting to the Multichannel Supply Chain

How do industry insiders expect demand forecasting to adapt to multichannel supply chain? According to Gartner analyst Tom Enright, multichannel needs a new way of forecasting demand – rather than just answering the question “How many will we sell?” –[...]

The Role of Inventory Optimization in a Market-Driven Supply Chain

It’s time to rethink inventory. For years it’s been portrayed as a place where working capital goes to die. But in today’s market-driven supply chain, inventory optimization is gaining increased purpose and meaning. Getting inventory right means thinking of it in a[...]

10 February 2015

Supply Chain Innovation: Service Parts Planning Case Study

Last week we talked about the complexity of service and aftermarket parts planning, and what’s new in supply chain planning (SCP) in that arena. This week we’ll look at a company that embodies that complexity—and is using advanced SCP technology to[...]

3 February 2015

Supply Chain Innovation: What’s New in Service Parts Planning

Service parts planning can be a head scratcher. Aftermarket supply chains usually require multi-tier distribution networks, lots of part numbers, and intermittent demand. Traditional supply chain planning solutions don’t address this “long tail” problem of small quantities and infrequent orders,[...]

27 January 2015

Multi-Echelon Inventory Optimization and Fast Time-to-Benefit

Multi-echelon inventory optimization (MEIO) may sound like a mouthful, but the concept is simple—create the best strategy, across the multiple stages of your supply chain, to fill demand in a way that optimizes working capital, margin attainment or some other[...]