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Inventory Optimization: Impact of a Multi-Echelon Approach


Inventory Optimization Inventory Management

Inventory optimization's business mission is to right-size an organization's inventory investment to meet a given service target. But what approach most helps supply chain professionals find that perfect balance between service and investment? This Aberdeen research report by Bryan Ball, vice president and principal supply chain management analyst, finds that companies utilizing multi-echelon inventory optimization (MEIO) have a more comprehensive understanding of their inventory and are twice as capable as others of balancing cost and service levels across their network.

The report indicates that the leading driver for inventory optimization adoption is the need to reduce inventory carrying costs, and finds that multi-echelon inventory optimization users are twice as likely to adopt advanced supply chain capabilities such as inventory segmentation, replenishment and event management than non-MEIO users. Companies employing multi-echelon inventory optimization saw a 28% increase in inventory turns, and were twice as likely to tie target-setting to the S&OP process. MEIO users also experienced impressive boosts in cash-to-cash cycle and perfect order improvement.

According to author Bryan Ball, “As supply chains become more complex, the need to address end-to-end challenges effectively through the use of MEIO solutions will become a necessity, not an option." The report features interviews with two Logility customers; Stanley Black & Decker and a global chemical company.


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