Is inventory optimization the same as reducing inventory?

No. It often reduces excess on some items while increasing stock on items that keep running short. The goal is the right level per item.

Do I need demand forecasting first?

Not to start. Usage history, current lead times and current stock already show which items are short or in excess. Forecasting helps for items with known changes ahead.

How do I know it is working?

Fewer shortages on the items you fixed, less value above target, and parameters that match current lead times.

Glossary

What is inventory optimization? Where to start

Inventory optimization: Inventory optimization means holding the stock each item needs to meet demand reliably, and no more, by setting reorder points, safety stock and order quantities on current data.

By Roufaida Bouchamha, founder

The definition

Inventory optimization is the work of matching stock levels to what each item actually needs: enough to cover demand during the supplier's lead time plus its variability, without the excess that ties up cash and space. In practice it comes down to a few parameters per item: reorder point, safety stock, order quantity and target stock.

Why stock drifts away from what it should be

Lead times change while parameters stay the same (lead-time drift).
Demand changes and nobody updates the usage behind the reorder points.
Minimum order quantities force buys larger than usage.
Engineering changes leave old parts on the shelf.

The result is the same in most plants: too much of some items and not enough of others, at the same time.

Where to start, item by item

Find the items that will run short: compute days of cover and compare it with the next delivery. These are the shortage risks.
Find the excess: measure value above target and items with very long cover and no recent movement.
Fix the parameters behind both: update lead times, then reorder points and safety stock on the items that keep appearing in either list.
Repeat monthly for critical items and quarterly for the rest.

Illustrative example, not a customer result

Out of 3,000 active items, a review finds 40 items whose cover runs out before their next delivery and 120 items holding stock well above target. Most of the 40 have reorder points set on lead times their suppliers no longer quote. Fixing those parameters first addresses both lists at once.

Software or method?

Advanced planning tools can calculate statistical safety stock and order quantities across thousands of items. They need clean data and a project to set up. Many mid-market teams get a large part of the benefit by fixing the parameters of the items that keep causing shortages or excess, starting from the exports they already run.

How WERISCO fits

WERISCO does not optimize your inventory policy or change parameters in your ERP. It shows parts that will run short, ranked by days of cover, value held above your own target levels item by item, and where reorder points were set for lead times your suppliers no longer quote, from your ERP or your exports. Your team decides what to change. See the inventory solution.

Questions people ask

Is inventory optimization the same as reducing inventory?: No. It often reduces excess on some items while increasing stock on items that keep running short. The goal is the right level per item.
Do I need demand forecasting first?: Not to start. Usage history, current lead times and current stock already show which items are short or in excess. Forecasting helps for items with known changes ahead.
How do I know it is working?: Fewer shortages on the items you fixed, less value above target, and parameters that match current lead times.