Inventory Optimization

Inventory Optimization is the operational discipline of balancing stock levels to minimize total cost (purchase + carrying + ordering + stockout) while meeting customer service targets. It involves demand forecasting, safety stock calculation, economic order quantities, ABC/XYZ classification, and continuous reorder-point adjustments. Practitioners analyze SKU velocity, lead times, and demand variance to determine how much to stock and when to reorder. The goal is maximizing inventory turns (revenue ÷ average inventory) while maintaining high in-stock percentages. A 5% improvement in inventory turns can free up $100k+ in working capital for mid-size operations.