Inventory Optimizer

Overview

The Inventory Optimizer skill provides comprehensive capabilities for optimizing inventory management. It supports ABC/XYZ classification, safety stock calculation, reorder point optimization, and service level optimization.

Capabilities

• ABC/XYZ classification
• Safety stock calculation
• Reorder point optimization
• EOQ calculation
• Inventory turn analysis
• Dead stock identification
• Carrying cost analysis
• Service level optimization

Used By Processes

• LEAN-004: Kanban System Design
• CAP-003: Sales and Operations Planning
• TOC-001: Constraint Identification and Exploitation

Tools and Libraries

• Inventory management systems
• Optimization algorithms
• Demand forecasting tools
• ERP integration

Usage

skill: inventory-optimizer
inputs:
  items:
    - sku: "PART-001"
      annual_demand: 12000
      unit_cost: 25
      lead_time: 5  # days
      demand_variability: 0.15  # coefficient of variation
      holding_cost_rate: 0.25  # annual
      order_cost: 50
    - sku: "PART-002"
      annual_demand: 500
      unit_cost: 500
      lead_time: 20
      demand_variability: 0.30
      holding_cost_rate: 0.25
      order_cost: 75
  service_level_target: 0.95
  analysis_type: "comprehensive"
outputs:
  - abc_xyz_classification
  - safety_stock_recommendations
  - reorder_points
  - eoq_calculations
  - inventory_investment
  - service_level_analysis

ABC/XYZ Classification

ABC Analysis (Value)

Class	% of Items	% of Value	Management
A	10-20%	70-80%	Tight control
B	20-30%	15-20%	Moderate control
C	50-70%	5-10%	Simple control

XYZ Analysis (Variability)

Class	CV Range	Predictability	Approach
X	0-0.5	High	Statistical
Y	0.5-1.0	Medium	Mixed
Z	>1.0	Low	Manual

Safety Stock Calculation

Safety Stock = Z x Standard Deviation x Square Root(Lead Time)

Where:
- Z = Service level factor (1.65 for 95%)
- Standard Deviation = Demand variability
- Lead Time = Replenishment time

Example:
- Daily demand: 100 units
- Daily std dev: 15 units
- Lead time: 5 days
- Service level: 95% (Z = 1.65)

Safety Stock = 1.65 x 15 x sqrt(5) = 55 units

Economic Order Quantity (EOQ)

EOQ = Square Root((2 x Annual Demand x Order Cost) / Holding Cost)

Example:
- Annual demand: 12,000 units
- Order cost: $50
- Unit cost: $25
- Holding rate: 25%

Holding cost = $25 x 0.25 = $6.25

EOQ = sqrt((2 x 12,000 x 50) / 6.25) = 438 units

Reorder Point

Reorder Point = (Average Daily Demand x Lead Time) + Safety Stock

Example:
- Daily demand: 100 units
- Lead time: 5 days
- Safety stock: 55 units

Reorder Point = (100 x 5) + 55 = 555 units

Inventory Metrics

Metric	Formula	Target
Inventory Turns	COGS / Average Inventory	Industry benchmark
Days of Supply	Inventory / Daily Usage	Per policy
Fill Rate	Orders filled from stock	>95%
Carrying Cost	Average Inventory x Rate	Minimize

Integration Points

• ERP/inventory systems
• Demand planning systems
• Warehouse management
• Procurement systems