Holding too much inventory involves high storage costs, deterioration, obsolescence and a large investment that can consume your available cash.
- Demand forecasting (Module ITA-Forecasting).
- Service planning.
- Replenishment planning.
The objective is to anticipate future demand through the application of modeling techniques. This is carried out with ITALOG-Forecasting which is another module of ITALOG platform that includes statistical and modeling capabilities. ITALOG-Forecasting gathers the most innovative and the most used forecasting techniques. Through a sophisticated benchmarking system, ITALOG-Forecasting selects automatically the model that best adapts to the demand at different aggregation levels.
The objective is to assign a service goal for each product basing on the contribution to cost and profit of the company. Typically, companies allocate the same service level to all products or use ABC strategies to establish “classes of service”. ITALOG-Forecasting suggests additionally an individual service level to each product so that a global goal of profit is maximized.
Once the service level is obtained, safety stock level of each product is determined. Safety stock is the extra stock that is maintained to mitigate risk of stock-outs due to demand and supply variability.
Replenishment planning involves determining replenishment parameters such as optimal order lot sizing, order frequency or reorder level. ITALOG–Inventory Planning obtains these parameters through simulation of different inventory policies as well as optimization of replenishment costs, mainly holding and transportation costs.
Due to its high flexibility, ITALOG–Inventory Planning allows managers to obtain replenishment parameters basing on historical data or forecasted data.
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