Supply Chain Management: A Global Perspective

Chapter 9

Inventory Management

LEARNING OBJECTIVES

After completing this chapter, you should be able to:

1. Describe different types of inventory, their uses and costs.
2. Explain inventory systems and ordering policies.
3. Understand how to compute order quantities, reorder points, and safety stock.
4. Differentiate between independent and dependent demand.
5. Understand practical issues of managing supply chain inventories.
6. Explain ABC inventory classification and vendor managed inventory (VMI).

Chapter Outline

• Basics of Inventory Management

  What is Inventory?

  Reasons for Carrying Inventory

  Types of Inventory

  Inventory Costs

• Inventory Systems

  Fixed-Order Quantity System

  Fixed-Time Period System

  Comparing Fixed-Order Quantity Versus Fixed-Time Period Systems

• Fixed-Order Quantity System

  The EOQ

  Economic Order Quantity (EOQ)

  Reorder Point (ROP)

  Safety Stock

  Economic Production Quantity (EPQ)

• Fixed-Time Period Systems

  Computing Target Inventory

• Independent Versus Dependent Demand
• Managing Supply Chain Inventory

  ABC Inventory Classification

  Practical Considerations of EOQ:

  Lumpy Demand (POQ)

  EOQ Adjustments

  Capacity Constraints

  Measuring Inventory Performance

  Vendor Managed Inventory (VMI)

• Chapter Highlights
• Key Terms
• Discussion Questions
• Problems

On an early July morning a crowd has gathered ...