Supply Chain Analytics: Inventory, Demand Forecasting, Logistics Optimization

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# Supply Chain Analytics: Inventory, Demand Forecasting, Logistics Optimization ## 🎯 Learning Objectives - Apply analytics to optimize inventory levels - Build demand forecasting models for supply chain planning - Optimize logistics and distribution networks - Measure supply chain KPIs and identify bottlenecks ## �...

Supply Chain Analytics: Inventory, Demand Forecasting, Logistics Optimization

🎯 Learning Objectives

Apply analytics to optimize inventory levels
Build demand forecasting models for supply chain planning
Optimize logistics and distribution networks
Measure supply chain KPIs and identify bottlenecks

📖 Core Content

1.1 Supply Chain KPIs

KPI	Formula	Target
Inventory Turnover	COGS / Avg Inventory	Industry-dependent (5-10× for retail)
Fill Rate	Orders Fulfilled / Total Orders	> 95%
Lead Time	Order to Delivery time	< industry avg
Stockout Rate	Days out of stock / Total days	< 2%
OTIF	On Time In Full deliveries / Total	> 90%

1.2 Demand Forecasting


python
# runnable
# Time series methods for demand forecasting
# Simple Exponential Smoothing: weights recent observations more
# Holt-Winters: trend + seasonality
# Prophet (Facebook): handles holidays, changepoints
# LSTM: for complex patterns with enough data
# Simple demand forecast formula:
# F_{t+1} = α × D_t + (1-α) × F_t
# where α is smoothing factor (0.1-0.3 typical for stable demand)

1.3 Inventory Optimization

The Economic Order Quantity (EOQ) model:

EOQ = \sqrt{\frac{2DS}{H}}

where D = annual demand, S = order cost, H = holding cost per unit. Safety Stock:

SS = z \times \sigma_d \times \sqrt{L}

where z = service level Z-score (1.65 for 95%),

\sigma_d

= demand std dev, L = lead time.

1.4 Why This Matters

Supply chain analytics directly impacts profitability. A 1% improvement in forecast accuracy can reduce inventory costs by 2-5% and stockouts by 10-20%.

2. 📝 Practice Questions

Q1: A retailer has annual demand of 10,000 units, ordering cost of $100/order, and holding cost of$ 5/unit/year. What's the optimal order quantity?

EOQ = √(2 × 10,000 × 100 / 5) = √(400,000) = 632 units

Ordering 632 units at a time minimizes total inventory costs (ordering + holding). They should place approximately 10,000/632 ≈ 16 orders per year. Join Discord PreviousMarketing AnalyticsNextPricing Analytics