TABLE OF CONTENTS After reading this chapter you should be able to:
know why inventory management is important;
recognize that managing inventories is a strategic as well as an operational issue;
identify strategies to reduce inventories within organizations and across the supply chain;
explain the importance of associated tools and techniques used by organizations to plan and control inventories, e.g. ABC/Pareto analysis, EOQ, VMI, collaborative planning, TQM, KANBAN, JiT, LP, MRP and MRPII, DRP, ERP, BRP.
Your best employees are leaving, your warehouse is full of unsold stock and the only person who ever calls is the bank manager.
The Sunday Times, 9 November 2003, p. 15, Business Section 3 'Warning signs of a failing business'
Inventory management or stock management are terms that can be used interchangeably. It is an essential part of managing the supply chain activities. The management challenge is to minimize the stockholding costs whilst simultaneously satisfying customer demand. In other words there is a trade-off between customer service levels achieved and inventories held.
There are a number of tools and techniques that enable managers to manage the trade-offs involved in managing inventories and balancing customer service levels. These include: ABC/EOQ/JiT/MRP/DRP/ CRP/ERP each of which will be explained below.
ABC analysis is a simple but very important technique to identify different categories of stock. It is sometimes referred to as the Pareto concept because it applies Pareto's 80/20 rule. In other words 80 per cent of the value is accounted...
