Inventory planning is the process by which companies manage inventory to achieve:
- Quality: Products are kept in good condition. Perishable items are not kept too long.
- Speed: Optimal inventory location enables faster response to customer requests.
- Dependability: Risk of stock-outs are minimal.
- Flexibility: The company can continue responding to customer requests even as it switches to new products.
Adapted from Operations Management (4th Ed, Pearson).
Advanced-analytic forecasting optimizes inventory management in part by balancing the costs of holding too much inventory (facility, spoilage, loss, etc.) with the cost of holding too little inventory (lost sales & customers, missed production schedules, etc.). Inventory optimization finds and maintains optimal safety stock levels, reorder levels, order quantities, service levels, fill rates, and more.