Advanced Inventory Optimization (AIO) solutions deliver targeted customer service levels with the minimum amount of network inventory. AIO solutions differ from traditional replenishment solutions that only contain a single stage inventory calculator designed to determine inventory targets for a single node in the supply chain at a time. In contrast, AIO solutions simultaneously calculate where and how much inventory should be held across multiple echelons of a supply chain. There are two types of AIO solutions. Regular Inventory Optimization solutions calculate target inventory levels for raw material, work-in-process, and finished goods. Parts Inventory Optimization is focused on calculating stocking levels for service parts in a multi-echelon supply chain.
This is still a young, small market that requires educating potential customers of the significant benefits AIO offer over competing types of solutions. Statistically, the optimization is complex and as a result ARC is forecasting that Knowledge Based Outsourcing will be a key driver of market growth. Knowledge Based Outsourcing involves outsourcing all or some portion of a planner's job to an outside party.
In ARC's interviews with users of AIO systems, a high proportion of references reported either a quick payback period or a high Return on Investment. A key challenge will be getting this message to the market. Other key issues include:
1. How can suppliers convince potential customers that their form of optimization is superior to traditional forms?
2. How can suppliers leverage Knowledge Based Outsourcing and Software as a Service to gain new customers?
3. Will new distribution channels will be required?
4. How will entry of ERP suppliers affect the dynamics of this market?
Timely, incisive articles delivered directly to your inbox.