Logistics companies are constantly trying to optimize their supply chain. Inventory optimization (IO) is one of the most important parts of that process. IO can be defined as "the act or process of identifying and reducing waste in the inventory system."
Inventory optimization is one of the critical concepts in logistics. This process makes the best possible inventory configuration, considering trade-offs between costs and benefits. It can be achieved using mathematical programming, simulation or network analysis. The main goal of this process is to reduce costs and increase efficiency, safety, customer service level, and so on.
Inventory optimization can be applied at any stage of the supply chain - from raw materials' procurement, through production, distribution and retailing. Many algorithms can optimize inventory, including order lot sizing, safety stocks, lead time reduction, and more.