Running the Numbers - April/May 2006

A Tough Nut Worth Cracking

Advanced inventory optimization solutions are complex and difficult to use, but companies will turn to new options for taking advantage of these applications and reap substantial returns, predicts an ARC Advisory Group study.

The report, "Advanced Inventory Optimization Worldwide Outlook: Market Analysis and Forecast through 2010," calculates that the worldwide market for advanced inventory optimization (AIO) will grow at a compound annual growth rate (CAGR) of 12.6 percent over the next five years, expanding from $99.2 million in 2005 to reach $179.6 million in 2010.

ARC said AIO solutions are a type of supply chain planning (SCP) solution. However, the optimization is different from that found in traditional SCP systems that contain a single- stage inventory calculator designed to determine inventory targets for only a single node in the supply chain at a time.

Rather than calculating safety stocks for a single supply chain node, AIO solutions simultaneously calculate where and how much inventory should be held across the network of locations at which inventories could be held.

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