Multi-Echelon Inventory Optimization for Supply Chain Management 

Solution Multi-Echelon Inventory Planning Tool
Solution Multi-Echelon Inventory Planning Tool
Industry CPG
Region US
Technology Microsoft Azure
Context
Supply chain networks in CPG enterprises include multiple touchpoints spanning suppliers, manufacturers, distribution centers, and more, which need to be aligned to optimize inventory levels. Enterprises can choose to do this at an independent level, a traditional approach where each node is optimized in isolation, often leading to stock imbalance and unavailability, additional spends, affected service levels, and more that adversely affect the entire supply chain. A recommended approach to tackle these challenges is Multi-Echelon Inventory Optimization (MEIO), which holistically and strategically balances inventory across all supply chain stages. Enterprises with a defined supplier network and demand forecasting capabilities can leverage MEIO to ensure adequate inventory at the right place, at the right time, and at a minimal cost. This further elevates customer experience and equips enterprises to react to market volatility promptly.     
Problem statement

Our client, a CPG leader in home & personal care products, struggled to determine an optimal inventory policy owing to the complexity of their supply chain network and its high interaction rate. With multiple distribution centers and retailers in each region, they found it difficult to streamline inventory to ensure stock availability in each node. The lack of a centralized data repository posed an additional challenge for developing an integrated solution. This current state has led to multiple scenarios of stock fluctuation, wavering lead time, and inability to adapt to market demands, all of which inevitably affect the customer experience.   

MathCo recommended building a Multi-Echelon Inventory Planning tool to determine optimal inventory levels across the client’s supply chain stages.

Impact

  • Reduced stockouts by ~12% annually 
  • Expedited shipments and reduced lead time across inventory by ~17%
  • Reduced expediting and emergency shipments by more than 22%

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