Today it is evident that companies are largely competing on their supply chains. inventory optimization has evolved into a portfolio of best practices that impacts both the working capital on the company’s balance sheet and the top line on the income statement.
 
Making inventory optimization a core competency increases competitive advantage. At every earnings call, analysts question how inventory turns stack up against the competition. Companies that have embraced IO as a discipline know exactly where their inventory is—and why—and can confidently defend the deployment of the company’s assets.
Five key inventory best practices should become core competencies of your supply chain team:
- Integrate inventory optimization across raw material inventory (RMI), work-in-process (WIP) and finished goods inventory (FGI). In other words, adopt multi-echelon inventory optimization (MEIO).
- Address business cycles, seasonality and product lifecycles through time-phasing of inventory targets.
- Manage SKU proliferation by postponing final product differentiation until later stages in the supply chain and pooling inventory to meet aggregated demand.
- Fully account for total landed costs across an entire portfolio of products prior to making outsourcing decisions.
- Set multiple classes of customer service and manage ABC items for each class.

If your company has not yet embraced inventory optimization as a mature discipline, one of your competitors may be poised to show you how it’s done.