100%(3)3 out of 3 people found this document helpful
This preview shows page 1 - 2 out of 2 pages.
1 What is the impact (benefits) of inventory optimization? Inventory optimization goes beyond addressing inventory levels and reducing carrying costs and obsolescence costs. It results in improves service levels and overall business performance as shown through the improved metrics. The decrease in obsolescence cost is 24% greater for IO users and carrying cost decreases are 33% greater. The improvement in finished goods inventory turns again showsa significant advantage for the IO users over those that are non-users (51% improvement vs. 23%), whichis more than double. It also have good effect on perfect order percentage to customers, the percentage of those who reported an increase easily favored the IO users at 49% compared to non-users of 39%. Thegross margin reflects a four-point improvement for IO users compared to non-users, which is a huge improvement. 2 What are the businesses pressures affecting all companies mentioned in the article?The top two business pressure are reducing inventory carrying costs to improve gross margin and improving service levels. The juggling act that goes on between these two pressures is often viewed as a win/loss exercise. The combined pressure is to get inventory levels and the associated carrying and obsolescence costs down their lowest levels, while maintaining or increasing service levels. The third business pressure is to reduce the product price to remain competitive without losing profit margin.3 What are the top three actions for inventory Optimization users (companies)The first is to improve inventory modeling, safety stock setting, and inventory mix. The nature of the modeling can be both tactical and strategic. Tactically, the process involves review of each SKU and look at the actual demand, compared to forecast, plus the actual receipt of goods from the supply side compared to the plan. The value of this approach is to understand whether there are issues, from the forecasting accuracy point of view or from the supply side execution that might affect the required stocking level. Strategically, IO can also be used to answer some of the tough questions, such as where