Inventory Optimization: Key Concepts and Practice
What Is Inventory Optimization?
Inventory optimization is the practice of determining the ideal quantity of each SKU to hold at each location at any given time. The goal is to hit customer service level targets while minimizing the costs of holding too much inventory (carrying costs, obsolescence, storage) and the costs of holding too little (stockouts, expedited shipping, lost revenue).
For product businesses managing multiple SKUs across multiple locations, true inventory optimization is not a spreadsheet exercise. It requires dynamic calculations across:
