Multi-Echelon Inventory Optimization (MEIO)

Updated September 2026Finance Software Glossary

Multi-echelon inventory optimization (MEIO) is a technique that sets inventory targets across every tier of a supply network at once, factories, distribution centers and warehouses, instead of optimizing each location on its own. By modeling how demand and supply variability move between tiers, MEIO commonly holds less total inventory at the same service level than single-echelon methods.

Single-echelon methods set safety stock at each location as if it stood alone, which stacks buffers on top of buffers through the network. MEIO models the network as one system and places inventory where it protects service at the lowest total cost, often more at central locations and less at the edges.

MEIO matters most for companies with several distribution tiers, long or variable lead times and wide product ranges. For a finance audience, it's one of the few supply chain levers that releases working capital without hurting customer service.

In software: MEIO is a core capability of dedicated supply chain planning tools such as ToolsGroup, Logility and o9. EPM platforms that offer inventory planning generally don't go to this algorithmic depth, which is a common reason finance-led teams pair them with a dedicated tool.