Supply Chain Optimization

Supply Chain Optimization

Supply Chain Optimization is the application of mathematical methods to guarantee the optimal operation of a manufacturing and distribution. This includes, but not limited to, minimizing operating costs as well as the optimal placement of inventory within the supply chain. These days, the optimization always involves the use of computer software.

The Issues

The typical task comes down to maximizing the profitable operation of distribution supply chain and manufacturing. This includes measures like maximizing gross margin return on inventory invested and minimizing total operating expenses (inventory, transportation, and manufacturing). Supply chain optimization calls for the general supply chain problem i.e. providing products to clients at the highest profit, but the lowest price. This issue comes to trading off the costs of inventory, transportation, distributing, operating costs, and manufacturing. Supply chain optimization applied in all industries of manufacturing or distributing products.

Possible Solutions

Almyta Inventory Control Software is using the classic supply chain approach of forecasting the future inventory demand, by applying statistical trending and "best fit" techniques based on historic demand (sales and consumption)and predicted future events. The advantage of this approach is that it can be applied to data aggregated at a fairly high level (e.g. category of merchandise, weekly, by group of customers), requiring modest database sizes and small amounts of manipulation. Unpredictability in demand is then managed by setting stock “reorder” and “fill to” levels, so that for example a distributor might hold two weeks of supply of an item with steady demand but twice that amount for an item where the demand is more erratic. Then, using this forecast demand, a supply chain manufacturing and distribution plan is created to manufacture and distribute products to meet this forecast demand at lowest cost (or highest profitability). This Almyta Inventory Control Software plan gives answers to the following business questions: - How much of each product should be manufactured each day? - How much of each product should be made at each manufacturing plant? - Which manufacturing plants should re-stock which warehouses with which products? - What transportation modes should be used for warehouse replenishment and customer deliveries? The technical ability of Almyta Inventory Control Software to record and manipulate larger databases more quickly has now enabled our clients to easily produce forecasting at a much more granular level (for example, per item per customer per day). Some clients are applying "best fit" models to this data, to which safety stock rules are applied, while other clients have tend to apply stochastic techniques to the optimization problem. They calculate the most desirable inventory level per item for each individual store for their retail customers, trading off cost of inventory against expectation of sale. The resulting optimized inventory level is known as a model stock. Meeting the model stock level is also an area requiring optimization. Because the movement of product to meet the model stock, called the stock transfer, needs to be in economic shipping units such as complete unit loads or a full truckload, there are a series of decisions that must be made. Many existing distribution requirements planning systems round the quantity up to the nearest full shipping unit. The creation of for example, truckloads as economic shipment units requires optimization systems to ensure that axle constraints and space constraints are met while loading can be achieved in a damage-free way. This is achieved by our proprietary algorithm. Optimization solutions are part of Almyta Inventory Control Software replenishment module. The orders can be automatically generated to maintain the model stock profile. The algorithms used are similar to those used in making financial investment decisions; the analogy is quite precise, as inventory can be considered to be an investment in prospective return on sales. Supply chain optimization may include refinements at various stages of the product lifecycle, so that new, ongoing and obsolete items are optimised in different ways: and adaptations for different classes of products, for example seasonal merchandise.

By downloading Almyta Inventory Control Software free trial, you are doing a first step towards the better inventory management!

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