Multi-Echelon Inventory Optimisation improves the Supply Chain
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As corporations mature, their echelons or levels start to increase, generating more complex Supply Chains (SCs) with other management intersections to synchronise and improve. If each node is a detached event, companies fail to attend strategic awareness and eventually leave behind potential benefit and savings.
Companies must efficiently deal with inventory through several echelons to keep up an operational SC.
What is Multi-Echelon Inventory Optimisation (MEIO)?
The target of MEIO is to count on the ‘right amount of stock at the right location and at the right time.’
To better comprehend MEIO, we should start explaining what a single-inventory optimisation plan is. It is a kind of supply planning approach managing separately stock at each location is managed independently. This strategy functions well for minor companies with no complex SC networks and smaller distribution centre; in dealing with each distribution level alone, you might fail to recognise the impact one level has on another. More giant corporations operate the MEIO model differently.
Without a well-defined inventory optimisation strategy, companies might decide on maintaining more stock all through their SC; they could encounter spikes in consumer’s demand but not all set with enough supply ready at any distribution centre. This approach is neither economical nor profitable since it leads to inventory surplus, with too much capital engaged in stock no-relocated fast enough.
Ten MEIO benefits:
· It proposes solutions for companies to optimise inventory levels all through their distribution networks.
· Companies strategically handle their inventory from a wide-ranging standpoint to effectively optimise inventory right through their SC.
· By evaluating the best inventory development throughout each echelon, corporations put off timely SC postponements.
· Incorporating the MEIO method, companies benefit from accurate visibility.
· MEIO enhances cost efficiency.
· MEIO aids companies to make better use of investments.
· It decreases stockouts.
· It makes possible to fulfil consumer’s requirement by calculating stock levels.
· Supply runs more fluidly all through the SC.
· To achieving financial success.
To manage the optimised inventory levels, you must project an adequate amount of stock levels at each echelon whilst avoiding costly overstocking. When forecasted too low, companies would miss possible customer’s sales as a result of stockouts. Contrary, if predicted too high, your organisation would have surplus stock that would not reallocate right away enough, resulting in diminishing your operational capital.
The way out is Multi-echelon Inventory Optimisation (MEIO), a predictable-strategic approach to support planning capable of forecasting stock levels through different distribution and warehouse locations.
Improved supply management or market volatility
Companies might be surprised when unexpected changes in market demands or supply occur; for instance, what we experience in March 2020 at the worldwide pandemic outbreak.
With MEIO, corporations accomplish the best levels of stock all through their SC. Having sufficient stock at any site throughout their distribution networks enhances agility, letting them respond rapidly to market and supply volatility.
Better Lead Times
Unexpected shifts in lead times came up when suppliers estimate lead times might not always be exact, leading to shortages, surplus stock, and more. MEIO helps companies preserve sufficient stock levels through the SC network, letting them adjust and respond to show changes rapidly as they happen.
Better Return on Investments (RoI)
With the MEIO strategy in place, corporations can successfully meet consumer’s demands, representing better profits and more significant RoI.
Summing up: in this in-progress stormy economic environment caused by the global pandemic, it is even more necessary to count on a solid inventory strategy to lessen risk and keep up the most favourable stock levels.
Implementing a robust inventory management method is essential for businesses to handle goods and services across their SCs successfully. MEIO solution leverage inventories through the whole distribution network, considering the inter-dependencies among echelons.
Are you moving forward to avoid stockouts and deliver highly competitive service levels?