P
lanning Opinion
distribution centres—is a core benefit of Multi-
After product launch, a crucial factor in
hybrid forecasting methods that mix related
Echelon Inventory Optimisation (MEIO). MEIO
maximising lifetime profitability is continually
historical demand with real-time empirical
looks at all safety stocks throughout the
right-sizing inventory. Too much inventory
data to tune forecasts to market demand. To
stages and locations of the supply chain and
creates excessive discounting, obsolescence,
maximise profitability, consumer electronics
analyses lead times, costs, and many other
and write-offs. Too little inventory, or inventory
companies must also arm themselves with
factors. The MEIO system recommends
in the wrong location, causes missed sales.
the right inventory optimisation strategies.
amounts and placement of inventory buffers
To prevail over demand uncertainty, planners
MEIO-driven inventory targets outperform
to minimise inventory cost while achieving
must be confident they know the best amount
rules of thumb, and dramatically exceed the
required service levels at launch and
of inventory to build and just where to position
service level performance of single-stage
throughout the lifespan of the product.
it. By recognising the interrelationships
inventory optimisation. n
Postponement strategies allow more stock to
between supply chain stages, MEIO can react
be held at lower-cost stages of
more quickly to real-time demand signals and
manufacturing, before major value-add steps
recommend holistic inventory adjustments
are performed.
across the entire network.
About the Author MEIO-driven inventory targets outperform results achieved using single-stage inventory
Two weapons to battle excess inventory
optimisation. Figure 1 shows how a major
Consumer electronics, with their short life
electronics manufacturer developed and
cycles, demand uncertainty, and forecasting
successfully implemented a single-stage
difficulties, pose a challenge to supply chain
optimisation programme dramatically
teams. Today’s supply chain teams must be
improved service level performance by
able to get in front of these issues, anticipate
turning to MEIO.
market changes and optimise their networks
rules of thumb, and also significantly surpass
Karin L. Bursa is vice president of marketing at Logility, a provider of collaborative supply chain management solutions. She has 25 years of experience in the development, support and marketing of software solutions to improve and automate enterprise-wide operations. You can follow her industry insights at www.logility.com/blog.
for success. Demand planners should adopt
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March 2013
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