So, you have decided that you want to step your inventory game up. You might have already applied demand planning principles to your company, and you surely must have noticed improvements in your costs due to that. However, it may seem difficult to try to control inventory inputs in each stage of product development. So, what can you do to assuage this? MEIO (Multi-Echelon Inventory Optimization) is the answer.
What is MEIO?
Speaking in layman's terms, MEIO, or Multi-Echelon Inventory Organization, is a streamlined way of organizing stock at each part of the production cycle. How is this done? Very easy, by calculating the optimal amount of inventory needed at each stage of product development for the elaboration of the final product.
This can be considered the pinnacle of demand planning, as each and every single process within the supply chain network is properly controlled, and both the supply and demand seamlessly align by having the perfect amount of stock product at all times.
This form of stock organization brings some considerable upsides to the overall layout of the organization, as many costs will be reduced due to cutting down on production logistics because everything will be located in its due place. The additional benefit is that this will reduce the required working capital as well, because processes will be run much more effectively, hence reducing demanded personnel and expenses.
Importance of MEIO
MEIO is very important for companies of all sizes but becomes preponderantly relevant when it comes down to big ones. In most cases, most small and mid-sized companies employ single-inventory optimization, as their supply chains are easier to control, and there are fewer steps between the manufacturing process and its endpoint. Its main difference with MEIO is that each level of the supply chain process is organized INDEPENDENTLY from the others. With MEIO, all processes are conjointly coordinated for optimization, meaning that all stages are deeply correlated with each other.
In large companies, this can pose a positive impact on their general organization. If single-inventory optimization is utilized, and there's any shortage (or surplus) of inputs in one of the sectors, it can create a domino effect with unfavorable consequences that directly result in the shortcoming of customer demand satisfaction.
Advantages of MEIO
Firstly, amidst the positive points, we can find within this form of inventory organization the most prominent one is cost-efficiency increases. Since you'll be cutting down on the bare-bones quantity of stock throughout the supply chain, you'll be saving a lot of money on unneeded prime materials.
Secondly, customer service. Having the right amount of product at all times for clients will further the feelings of customer satisfaction, as it will show them that the company is prepared to suit their necessities.
Finally, overall improved Return on Investment. By decreasing the overheads, and by increasing sales, the returns will be greater than if MEIO isn't used.
MEIO Is What YOUR Company Demands!
By having the right amount of product supply every single time, all while not compromising your company's product development expenses, you can surely vouch for upgraded company efficiency and management.