Inventory Optimization has emerged as a top supply chain priority as companies seek to fulfill customer demand and not lose out on opportunities, according to research by Nucleus Research.

The information technology research company reports that beyond the high-profile retail battle for ecommerce, IO also has become vital strategic tool for manufacturing, logistics and even service companies to compete.

“Wall Street’s reaction to Walmart’s recent struggles in maintaining inventory levels during December’s holiday period underscores the importance of IO technology,” says Ian Campbell, CEO of Nucleus Research.

“Companies need to get smarter to understand demand and be better prepared to meet it. That requires automation and better ways to predict that demand,” he stresses.

The firm points out that leading software providers like E2open, GAINSystems, JDA Software, One Network, ToolsGroup and Vanguard are focusing on tools that minimize unnecessary stock across the value chain and reduce manual resources needed to manage inventory.

Nucleus Research also notes that the trend in IO is moving quickly towards connecting planning tools more closely with point-of-sale data and similar demand indicators to enable better response rates as close to real-time as possible that reverberate down the supply chain.

This can help to alleviate risk to buyers – even with longer lead times stretching into weeks or months – through improved predictive machine-learning algorithms, the company explains.

“Inventory optimization is the new frontier in the battle for retailers,” observes Seth Lippincott, principal analyst at Nucleus Research.

“Businesses that have the products their customers want in stock and on time are able to gain competitive advantage over those who struggle to maintain inventory levels.”