Multi-Echelon Inventory Optimization – Eliminate The Slack

David Edwards . Operations Professionals

As our global supply chain continues to expand the number of layers of inventory between suppliers and the ultimate level of consumption, it is important to look more closely at how this inventory is managed. In traditional supply chain management practices, each level (echelon) of supply and demand is evaluated independently in order to determine the optimum level of inventory to carry at each echelon. Companies that have managed internal multi-echelon distribution networks have learned that this approach will ultimately lead to excess inventory levels in the system as a whole. This holistic evaluation process is now being applied across multi-company supply chains in order to minimize inventory across all levels of the supply chain while maintaining the ability to meet customer demands.

The linked white paper is an article on multi-echelon inventory optimization by Calvin Lee of Evant (Subsidiary of Manhattan Associates). Dr. Lee does a good job of explaining the advantages of the holistic planning process without getting to deep into the technical underpinnings of the process. A good paper for getting the idea and advantages of the multi-echelon optimization process in front of a broad audience.

Read the Article Here: Multi-Echelon Inventory Optimization

By Calvin B. Lee, Ph.D.
Vice President and Chief Scientist, Evant Inc.
The optimal deployment of inventory is a vital business function for an enterprise. The well-documented benefits of running a manufacturing, distribution or retailing operation with leaner inventory range from a permanent reduction in working capital to increased sales and higher customer satisfaction. As Forrester Research pointed out in a recent report, the ability to increase inventory turns is a key differentiator between highly successful and more poorly performing companies (e.g., Wal-Mart vs. Kmart; Dell vs. Compaq).


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