Inventory Level Optimization

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Inventory Level Optimization

The issue of inventory levels is one of the most important factors in determining success for product distributors.  This question is especially important for product distributors whose sales goals and timely customer service are directly related to its distribution, warehousing and shipping, infrastructure.  The variables for inventory and expansion are numerous and complex.  While the need to expand product offerings and improve shipping times is ever-present this must be balanced with sales volumes that are fluctuating and variables that out of the distributors control.

Linear Programming Equations for Inventory Management

(1) Profit margin for each product size (2) Volume of each product size, constrained by the total warehouse volume (3) Volume of each product size, constrained by a desired Minimum volume level (4) Cost to acquire customer per product constrained by total marketing budget (5) – (7) Absolute minimum product inventory level

Markov Chain Estimation

Model describes the chain of possible events as they relate to inventory levels.

Systems Dynamics Model of Inventory Demand

Model used to estimate the nonlinear behavior of potential changes in inventory levels.