An ideal inventory strategy would be low levels of inventory without any stock-outs. The challenge is to cope with multiple stocking points, seasonality and increasing range of products with shorter life cycles. Inventory planning will optimize the inventory carrying cost and/ or improve the order fill rates.

Inventory strategy helps determine the optimal mix of finished, semi-finished goods, components, raw materials and create smart segmentation for made to stock, made to order, Finish to order, Engineer to Order etc.

Inventory strategy consists of combining sales demand forecast with supply constraints such as delivery lead times. There is a need to calculate accurate safety stock levels based on demand uncertainty and supply variability along with optimizing order size and purchase frequency.

While the focus is on profitable SKUs, one needs to be equally smart about the SLOB – slow moving and obsolete items. Reduce the SLOB inventory by observing change in demand patterns