Inventory optimization is the balancing of investments between stock units and services, while considering the unpredictability of demand and supply. A company’s profitability is directly affected by the efficiency of managing supplies. Companies have to match their supplies with customer demand, at the same time maintaining low levels of stock. Nowadays, customer service is gaining importance. Companies prioritize providing customer requirements in order to maintain and acquire market share. However, improvement in customer service levels can lead to higher levels of safety stock. Carrying too many items in the inventory leads to high levels of obsolescence. On the other hand, reducing working capital can result in lower customer service levels. The balancing between inventory and service is crucial. Therefore, the use of technology to solve these complexities in inventory optimization is of prime importance. Companies in different industries such as manufacturing and retail are largely adopting inventory optimization software and services offered by vendors in the inventory optimization software and services market. Inventory optimization solutions include demand forecasting, purchase order flow management, replenishment, transportation & logistics optimization, supply chain advanced analytics, and value chain collaboration solutions.

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Vendors are offering solutions that align inventories with market trends, customer segments, strategies, and operations constraints, thus minimizing distortions by analyzing customers’ buying behavior. Demands are forecasted more accurately with this software, thus increasing inventory turnover and profits. Improved customer satisfaction and loyalty achieved through inventory optimization software and services drives their adoption across diverse industries. The adoption of inventory optimization software and services is mainly driven by the need to reduce inventory carrying costs. Cloud technology is expected to transform the inventory optimization software market during the forecast period. Companies such as Zoho Corporation Pvt. Ltd. have already started offering cloud-based solutions for inventory optimization. The inventory optimization software and services market is expected to witness significant growth opportunities with the emergence of multi-echelon distribution networks. Multi-echelon inventory optimization solutions optimize total inventory across the entire supply chain network taking into consideration the interdependencies between stocking locations. It also optimizes the mix of different types of inventory, such as work in progress or finished goods inventories, in an extended supply chain to most effectively service customers.