Advanced Inventory Optimization Market to Grow 13% Annually

ARC Advisory : The worldwide market for Advanced Inventory Optimization (AIO) is expected to grow at a Compound Annual Growth Rate (CAGR) of 12.6 percent over the next five years. The market was US$ 99.2 million in 2005 and is forecasted to reach US$ 179.6 million in 2010. Traditional software markets sell software licenses. However, in this market, Knowledge Based Outsourcing and Software as a Service will be key growth drivers.” Dr. Banker is the principal author of ARC’s

A Young Market

This is still a young, small market that requires educating potential customers of the significant benefits Advanced Inventory Optimization offers over competing types of solutions and processes for setting inventory targets. AIO delivers targeted customer service levels with the minimum amount of network inventory.

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 which is designed to determine inventory targets for only a single node in the supply chain at a time. Single echelon solutions are suboptimal because they do not take a holistic approach to network inventory optimization. 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.

Knowledge Based Outsourcing involves outsourcing all or some portion of a planner’s function to an outside party. As opposed to traditional business process outsourcing such as outsourcing repetitive tasks to a call center to India for example, knowledge based outsourcing involves outsourcing a function that requires knowledgeable and skilled workers. The software itself is designed to be used by planners that are analytical, have the pertinent product and company domain expertise, and “have a passion for the business. The software does not, however, require users to have a Ph.D. in Operations Research or Statistics. Nevertheless, many companies will find that they can benefit from Knowledge Based Outsourcing partners to regularly search for outliers and data anomalies, keep the software properly parameterized, and engage in strategic planning perhaps in conjunction with other complex tools such as Network Design.

Advanced Inventory Optimization worldwide Outlook: Market Analysis and Forecast through 2010 Publ 20060117