inventory optimization
in-VEN-tor-ee op-tih-mih-ZAY-shun
ɪnˈvɛntəri ˌɒptɪmaɪˈzeɪʃənListen
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Dictionary meaning
the use of quantitative methods, data analytics, and optimisation algorithms to determine the ideal stock levels for each product at each location in a supply network, balancing the cost of holding excess inventory against the cost and risk of stockouts; inventory optimisation models incorporate demand variability, lead time uncertainty, service level targets, carrying costs, ordering costs, and obsolescence risk to calculate optimal reorder points, safety stock levels, and economic order quantities; effective inventory optimisation can dramatically reduce working capital tied up in stock while simultaneously improving customer service levels
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