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?
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