Multi-echelon Inventory Optimization (MEIO) is a calculation that allows businesses to manage inventory to their best advantage. It can deal with all stages of the process. This algorithm will analyze each level of the supply chain and use data from past actions and transactions to determine the best way to manage the operation.
Each company or line of business needs to juggle supplies. Too much inventory and you are paying warehousing charges and won’t leave enough space or capital to stock the items you can sell quickly or at a higher price. Too little product on hand and you risk frustrating customers or losing sales entirely.
Inventory optimization (IO) can determine where and how much product or stock is needed and where it should be to make the most of the service level you want to maintain. It means a reduction in excess stock while having what you need, where you need it, and when you need it. You can think of it as “just in time” inventory control. You have enough raw products at the places that manufacture to produce your items and those items are stocked at your distribution centers so that you can continuously fill orders without delay or wasting space. It is efficient and profitable and very difficult with a large operation. Visit https://johngalt.com/ to learn more.
MEIO goes beyond IO. It can automate the stocking and restocking at all the company’s sites and can even project scenarios for hypothetical situations. It can deal with seasonal needs and new products in your line. Notifications and visual cues can help humans drive a profitable enterprise. Through MEIO you can choose specific strategies to control the delivery or excess stock at any or all locations. It does this by lowering the obsolescence rate or postponing deliveries, or by stopping some of the work in progress when it sees that a pile-up will occur.
Traditional systems look at each part of the supply chain independently. Because it views the business on a broader level, MEIO works on all areas simultaneously. This is a strategic advantage, especially for companies that deal in a large variety of products or a large distribution area, including globally.
Unlike Enterprise Resource Planning (ERP) which cannot handle multiple echelons and often relies on outdated information, MEIO views the entire scope of supply and demand on a continuous basis.
So, if you are a small company and seem to be filling orders on time without much fuss, MEIO is not for you. However, if you are a larger concern or your moderate business is suddenly in demand, and you are expecting to expand seemingly overnight (and wouldn’t that be nice!), then you should consult with a company about adapting MEIO.
The professionals will start looking at the service levels on each level of the supply chain. That will include raw products, manufacturing, delivery, storage, shipping, sites, and more. Using current data and then extrapolating to a “what if” situation, the algorithm will project log jams and recommend alternatives.
Typically it will work in conjunction with your SKU (the identifying alphanumeric code you assign to products to track inventory) but is also capable of analyzing by customers, groups, product types, etc. Because it is a rapid calculation, it can accelerate your decision-making so that you will always feel on top of things rather than playing catch up.
The MEIO System
The MEIO system only needs a relatively small amount of data and can be implemented within weeks in most cases. With only a minimal additional investment, it can be deployed for SaaS.
One of the advantages is eliminating the need for safety stock at your fulfillment center, or even at other stages of your production, for that matter. Results of MEIO implementation show that each location can have some safety stock, but by trusting the algorithms, companies are thriving and greatly reducing the excess materials previously held. Trust is the issue and can be overcome by proof of success.
Many companies still rely on a simple policy or gut instinct about how much safety stock to hold in reserve. However, more operations are calculating the amount of safety stock by a mathematical projection based on lead times, forcasting, service area, and lead times. Now with multi-echelon, advanced tools are available to solidify guesstimates into hard data that can be applied to your circumstances. It may seem counterintuitive, but if you research, you will find that our algorithms can optimize your inventories and increase your capabilities, all resulting in a greater profit and building an even better reputation.
It is important that you choose a reputable company to implement MEIO into your operations. Consultants should be able to answer your questions and offer statistical results that will support your long and short term goals and make it possible for you to manage and improve your inventory control and supply chain functions. Optimizing your capabilities will allow you the flexibility to rebalance in real time over all the levels or arms of your enterprise. Benefits include lower inventory cost, which will free capital for other purposes as well as improving customer service. Your ability to be responsive will increase your prominence and reputation in the marketplace. The end result is stronger financial health for your company.
Multi-echelon inventory optimization is available through a number of software packages. It may take some upgrades, but it is important that you choose wisely to the benefit of your company. The consultant or integrator for this software package should be able to explain exactly how this software will give you the desired results.
Check with JohnGalt.com to see why you should switch from Inventory Optimization (IO) to the more inclusive Multi-echelon Inventory Optimization (MEIO) for the continued success of your company.