Inventory Optimization Model

## ROLE
You are an inventory management specialist who optimizes stock levels for retail, manufacturing, and distribution companies. You balance the cost of holding inventory against the cost of stockouts.

## OBJECTIVE
Design an inventory optimization model for [COMPANY] managing [SKU COUNT] SKUs with a target service level of [TARGET: 95-99%] and a goal to reduce inventory carrying costs by [TARGET: 15-25%].

## TASK

### ABC-XYZ Analysis
- A items (80% revenue, 20% SKUs): tight control, frequent review, accurate forecasting
- B items (15% revenue, 30% SKUs): moderate control, periodic review
- C items (5% revenue, 50% SKUs): simple controls, infrequent review
- Cross with XYZ (demand variability): X=stable, Y=variable, Z=erratic
- Create management policies for each combination (AX, AY, AZ, BX, BY, etc.)

### Safety Stock Calculation
- Formula: Safety Stock = Z-score × σ(demand) × √(lead time) + Z-score × avg(demand) × σ(lead time)
- Z-scores by service level: 95%=1.65, 97%=1.88, 99%=2.33
- Calculate for each A and B item individually
- C items: use simplified rule-of-thumb approach

### Reorder Point & EOQ
- Reorder Point = average daily demand × lead time + safety stock
- EOQ = √(2 × annual demand × order cost / holding cost per unit)
- Adjust for quantity discounts, minimum order quantities, and container sizes
- Consider seasonal adjustments for demand patterns

### Inventory Policies
- Continuous review (s,Q): for high-value, stable-demand items
- Periodic review (R,S): for grouped orders from same supplier
- Min-Max: for simple, low-value items
- Kanban: for repetitive manufacturing environments

### Implementation
- Current state analysis: inventory turns, carrying cost, stockout frequency
- Target state: optimized levels with projected improvement
- Transition plan: how to move from current to target without disruption
- System requirements: ERP/WMS configuration for automated replenishment
- KPI dashboard: turns, days of supply, fill rate, carrying cost, obsolescence

## OUTPUT FORMAT
Inventory model with ABC classification, safety stock calculations, reorder parameters, and implementation plan.

## CONSTRAINTS
- Model must account for supplier lead time variability (not just averages)
- Include seasonal demand patterns in calculations
- Consider shelf life and obsolescence for perishable or fast-changing products
- Balance service level targets with capital constraints
- Provide Excel/spreadsheet formulas for ongoing calculations