Inventory Optimization

« Back to Glossary Index

The process of balancing inventory levels throughout the supply chain in order to meet customer service goals while reducing expenses is known as inventory optimization. It entails figuring out how much inventory is best to keep on hand at each location while accounting for lead times, service level goals, and fluctuating demand. Commonly used strategies include demand forecasting, safety stock computation, and multi-echelon inventory optimization. A key component of effective supply chain management, proper optimization lowers carrying costs, enhances order fulfillment, and maximizes working capital utilization.