Tayur is not only an expert in entrepreneurship and venture capital, but the founder of inventory optimization software firm SmartOps Corp.
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Like inventory optimization, assortment optimization too takes demand and supply volatility into account.
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Without inventory optimization, companies commonly set inventory targets using rules of thumb or single stage calculations. Rules of thumb normally involve setting a number of days of supply as a coverage target. Single stage calculations look at a single item in a single location and calculate the amount of inventory required to meet demand.Sean P. Willems, “How Inventory Optimization Opens Pathways to Profitability,” Supply Chain Management Review, March/April 2011.
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Inventory optimization is a method of balancing capital investment constraints or objectives and service-level goals over a large assortment of stock-keeping units (SKUs) while taking demand and supply volatility into account.
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Also, the amount of inventory held has a major impact on available cash. With working capital at a premium, it’s important for companies to keep inventory levels as low possible and to sell inventory as quickly as possible.William Brandel, “Inventory Optimization Saves Working Capital in Tough Times,” Computerworld, August 24, 2009. When Wall Street analysts look at a company’s performance to make earnings forecasts and buy and sell recommendations, inventory is always one of the top factors they consider.Dan Gilmore, “Supply Chain News: What is Inventory Optimization?,” Supply Chain Digest, August 28, 2008.
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Pages 36-38. Castrol used inventory optimization to reduce finished goods inventory by an average of 35 percent in two years while increasing service levels (defined as line fill rates) by 9 percent.Hallie Forcino, “Break on Through to the Other Side,” Managing Automation, February 2005.
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Smiths Medical, a division of Smiths Group, used inventory optimization to better address demand volatility and supply variability, thus reducing the risk of both understocks and overstocks while smoothing out manufacturing cycles.Robert J. Bowman, “For Smiths Medical, Service Quality Is an Ever-Moving Goal,” Supply Chain Brain, June 15, 2012.
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Through SmartOps, Tayur has also explored massively parallel versions of enterprise inventory optimization (EIO) algorithms on IBM's Blue Gene. In 2005, as Blue Gene's first supply chain application, the IBM-SmartOps pilot solved industrial scale problems with more than a million variables in 0.04 seconds on a "half rack" system with 512 processors.
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APQC Open Standards data shows that the median company carries an inventory of 10.6 percent of annual revenues as of 2011. The typical cost of carrying inventory is at least 10.0 percent of the inventory value. So the median company spends over 1 percent of revenues carrying inventory, although for some companies the number is much higher.Marisa Brown, “Inventory Optimization: Show Me the Money,” Supply Chain Management Review, July 19, 2011.
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In 2009, Siebel founded C3.ai, originally to provide enterprise software for energy management. C3.ai currently provides an enterprise AI software platform and applications for multiple commercial uses, including energy management, predictive maintenance, fraud detection, anti-money laundering, inventory optimization, and predictive CRM. Its customers include 3M, Royal Dutch Shell, the US Air Force, and New York Power Authority. C3.ai was included in the 2019 “CNBC Disruptor 50” list, with a valuation of $2.1 billion.
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Every company has the challenge of matching its supply volume to customer demand. How well the company manages this challenge has a major impact on its profitability.Yogesh Malik, Alex Niemeyer, and Brian Ruwadi, “Building the supply chain of the future,” McKinsey Quarterly, January 2011. In contrast to the traditional "binge and purge" inventory cycle in which companies over-purchase product to prepare for possible demand spikes and then discards extra product, inventory optimization seeks to more efficiently match supply to expected customer demand.
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MCIO is a software application purchased by Mincom Limited from Bruce McNaught and Associates Pty Ltd. The application is claimed to offer the ability for any company holding a large inventory to substantially reduce the inventory value while improving the service level on critical stick items. Mincom Launches Critical Inventory Optimization for Asset-Intensive Businesses, 2009 Originally known as SIAM AIDN-VIC Newsletter 2007, No 10, Pg 6, MCIO integrates with Mincom's main Ellipse Asset management platform. It is designed to run on the Microsoft Windows family of operating systems.
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Inventory optimization models can be either deterministic—with every set of variable states uniquely determined by the parameters in the model – or stochastic—with variable states described by probability distributions.Leslie Hansen Harps, “Optimizing Your Supply Chain: A Model Approach,” Inbound Logistics, April 2003. Stochastic optimization takes supply uncertainty into account that, for example, 6 percent of orders from an overseas supplier are 1–3 days late, 1 percent are 4–6 days late, 5 percent are 7–14 days late and 8 percent are more than 14 days late.“Are Your Inventory Management Practices Outdated,” AberdeenGroup, March 1, 2005.
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Under Crandall's leadership, American continued to invest in yield management's forecasting, inventory control and overbooking capabilities. By the early 1980s, the combination of a mild recession and new competition spawned by airline deregulation act (1978) posed an additional threat. Low-cost, low-fare airlines like People Express were growing rapidly because of their ability to charge even less than American's Super Saver fares. After investing millions in the next generation capability which they would call DINAMO (Dynamic Inventory Optimization and Maintenance Optimizer), American announced Ultimate Super Saver Fares in 1985 that were priced lower than those of People Express.
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On October 26, 2006, ILOG acquired 35% of the capital and voting rights of the Chinese company Shanghai FirstTech Co., Ltd. (FirstTech). FirstTech is a systems integrator that develops and markets manufacturing and insurance solutions in the Chinese market. On November 20, 2006, ILOG acquired one-third of the capital and voting rights of Prima Solutions (Prima), a Paris-based supplier of software platforms for the insurance sector. On April 11, 2007, ILOG completed the acquisition of LogicTools, a Chicago-based provider of supply chain planning applications specializing in network design and inventory optimization. LogicTools’ applications are based on the ILOG CPLEX optimization product.
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In 2000, Tayur founded the software company SmartOps Corporation, after winning the First Prize in the EnterPrize Case Competition that year, and served as its CEO until 2012. The company raised Series A funding within 45 days, became profitable in 2003, and has experienced revenue growth every year since its inception. Through SmartOps, Tayur also coined the phrase "fix the mix" to refer to the approach of adjusting inventory levels for various items to meet target service levels with lower overall inventory investment. Several SmartOps customers, including Cabot Corporation, Celestica, ConAgra, Dow Chemical Company, Johnson & Johnson, Kohler Company, Lubrizol, LSI Corporation, Medtronic, PPG Industries, Wyeth, have spoken about their successes with Enterprise Inventory Optimization (EIO).
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Tayur was named one of the four “Masters of Supply-Chain Efficiency” by Fortune Magazine, and a “Most Popular Professor” by BusinessWeek. He has been ranked as one of the stellar operations management researchers. In 2012, Tayur was elected as a fellow of INFORMS for his lifetime achievements in “research on inventories and supply chain management, and developing new methodologies, implementing software in manufacturing, logistics and supply chains, and creating a market for enterprise inventory optimization software.” The importance of inventory control to economic productivity has been widely recognized, including by the Nobel-winning economist Paul Krugman, who states that, "The big productivity gains of the period from 1995 to 2005 came largely in things like inventory control" (See "The Big Meh", by Paul Krugman).
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