You have dusty shelves.
You want just-in-time inventory.
You need data-driven optimization.
You need a strategy.
Inventory optimization. Just-in-time. Data-driven. Your strategy.
This guide shows you how.
Optimization strategy. Ordering policies. Data application. Your solution.
Read this. Apply metrics. Optimize inventory.
Key Takeaways
- Calculate turnover regularly—use Inventory Turnover Calculator to track efficiency over time
- Set reorder points—calculate optimal reorder points based on turnover and lead times
- Reduce safety stock—use turnover data to minimize excess inventory while avoiding stockouts
- Optimize order quantities—balance ordering costs with holding costs using turnover metrics
- Monitor continuously—track turnover trends to adjust ordering policies as needed
Table of Contents
Why Optimization Matters
Optimization improves cash flow.
What happens without optimization:
- Excess inventory sits unsold
- Cash is tied up
- Storage costs increase
- Obsolescence risk grows
What happens with optimization:
- Inventory levels are optimal
- Cash flows freely
- Storage costs are minimized
- Obsolescence risk is reduced
The reality: Optimization enables efficiency.
Current State Analysis
Analyze your current state:
Calculate Current Turnover
Calculate it:
- Use our Inventory Turnover Calculator
- Enter current cost of goods sold and inventory
- See current turnover ratio
Why it matters: Analysis shows starting point.
Identify Problem Areas
What problems to identify:
- Slow-moving items
- Excess inventory
- Stockout items
- Inefficient ordering
Why it matters: Identification enables targeting.
Assess Current Policies
What policies to assess:
- Current reorder points
- Order quantities
- Safety stock levels
- Supplier lead times
Why it matters: Assessment shows what to change.
Pro tip: Analyze current state. Calculate turnover, identify problems, assess policies. See our inventory turnover basics guide for understanding.
Reorder Point Strategy
Set reorder points:
Calculate Reorder Points
What to calculate:
- Average daily demand
- Lead time in days
- Safety stock needs
- Reorder point level
Why it matters: Reorder points prevent stockouts.
Use Turnover Data
How to use data:
- Turnover shows demand patterns
- Days on hand shows holding periods
- Trends show seasonal variations
- Data guides reorder decisions
Why it matters: Data ensures accuracy.
Optimize Safety Stock
What to optimize:
- Reduce excess safety stock
- Maintain adequate buffer
- Balance stockout risk with cost
- Use turnover trends
Why it matters: Optimization reduces costs.
Pro tip: Set reorder points. Calculate points, use turnover data, optimize safety stock. See our Inventory Turnover Calculator for data.
Order Quantity Optimization
Optimize order quantities:
Balance Ordering and Holding Costs
What to balance:
- Ordering costs (per order)
- Holding costs (per unit)
- Total cost minimization
- Turnover considerations
Why it matters: Balance minimizes total costs.
Use Economic Order Quantity
What EOQ considers:
- Annual demand
- Ordering cost
- Holding cost
- Optimal order size
Why it matters: EOQ optimizes quantities.
Adjust for Turnover
What adjustments to make:
- Higher turnover: Smaller orders, more frequent
- Lower turnover: Larger orders, less frequent
- Match order frequency to turnover
- Optimize for cash flow
Why it matters: Adjustments improve efficiency.
Pro tip: Optimize quantities. Balance costs, use EOQ, adjust for turnover. See our inventory turnover basics guide for understanding.
Just-in-Time Implementation
Implement just-in-time:
Reduce Inventory Levels
What to reduce:
- Excess safety stock
- Slow-moving items
- Obsolete inventory
- Unnecessary buffers
Why it matters: Reduction improves cash flow.
Improve Supplier Relationships
What to improve:
- Shorter lead times
- More frequent deliveries
- Better communication
- Reliable suppliers
Why it matters: Relationships enable just-in-time.
Monitor Closely
What to monitor:
- Inventory levels daily
- Turnover trends
- Stockout incidents
- Supplier performance
Why it matters: Monitoring prevents problems.
Pro tip: Implement just-in-time. Reduce levels, improve supplier relationships, monitor closely. See our inventory dashboard guide for monitoring.
Monitoring System
Set up monitoring system:
Track Key Metrics
What metrics to track:
- Inventory turnover
- Days on hand
- Reorder frequency
- Stockout incidents
Why it matters: Tracking enables control.
Use Calculator Regularly
Calculate it:
- Use our Inventory Turnover Calculator
- Calculate monthly
- Track trends
- Identify changes
Why it matters: Regular calculation maintains awareness.
Adjust Policies
What to adjust:
- Reorder points as needed
- Order quantities based on trends
- Safety stock levels
- Supplier relationships
Why it matters: Adjustments maintain optimization.
Pro tip: Set up monitoring. Track metrics, use calculator regularly, adjust policies. See our inventory dashboard guide for comprehensive monitoring.
Your Next Steps
Analyze current state. Optimize policies. Implement just-in-time.
This Week:
- Review this guide
- Analyze current inventory state
- Calculate current turnover
- Identify optimization opportunities
This Month:
- Set new reorder points
- Optimize order quantities
- Reduce excess inventory
- Implement monitoring system
Going Forward:
- Monitor turnover regularly
- Adjust policies as needed
- Optimize continuously
- Maintain just-in-time levels
Need help? Check out our Inventory Turnover Calculator for calculation, our inventory turnover basics guide for understanding, and our inventory dashboard guide for monitoring.
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Sources & Additional Information
This guide provides general information about inventory optimization. Your specific situation may require different considerations.
For inventory turnover calculation, see our Inventory Turnover Calculator.
For inventory turnover basics, see our Inventory Turnover Basics Guide.
Consult with professionals for advice specific to your situation.
