Inventory Management in Logistics and Supply Chain

Study Notes

Inventory Management

Inventory management is a crucial aspect of logistics and supply chain engineering, as it involves the planning, coordination, and control of inventory levels to meet customer demand while minimizing costs.

Key Concepts:

Inventory: The stock of goods or materials held by a company to meet customer demand or support production.
Inventory management: The process of managing inventory levels, including forecasting, ordering, and stocking decisions.
Inventory costs: The costs associated with holding inventory, including storage, handling, and maintenance costs.

Inventory Management Objectives:

Minimize inventory costs: Reduce inventory holding costs while maintaining sufficient stock levels to meet customer demand.
Maximize service level: Ensure that customer demand is met on time and in full.
Optimize inventory levels: Balance inventory levels to avoid stockouts and overstocking.

Inventory Management Strategies:

Just-in-Time (JIT) inventory system: Maintain minimal inventory levels and order supplies just in time to meet customer demand.
Economic Order Quantity (EOQ) model: Calculate the optimal order quantity to minimize total inventory costs.
ABC analysis: Classify inventory into three categories based on value and importance: A (high value, high importance), B (medium value, medium importance), and C (low value, low importance).

Inventory Management Techniques:

Forecasting: Use historical data and statistical methods to predict future demand.
Lead time management: Manage the time between ordering and receiving inventory to minimize stockouts and overstocking.
Buffer stock management: Maintain a safety stock to protect against stockouts and uncertainties.

Inventory Management Performance Metrics:

Inventory turnover: The number of times inventory is sold and replaced during a period.
Inventory days supply: The number of days inventory will last at current sales rates.
Fill rate: The percentage of customer demand that is met from existing inventory.

These notes provide a concise overview of the key concepts, objectives, strategies, techniques, and performance metrics involved in inventory management, a critical aspect of logistics and supply chain engineering.

Inventory Management

Key Concepts

Inventory refers to the stock of goods or materials held by a company to meet customer demand or support production.
Inventory management involves planning, coordinating, and controlling inventory levels to meet customer demand while minimizing costs.
Inventory costs include storage, handling, and maintenance costs associated with holding inventory.

Inventory Management Objectives

Minimize inventory costs while maintaining sufficient stock levels to meet customer demand.
Maximize service level by ensuring that customer demand is met on time and in full.
Optimize inventory levels to avoid stockouts and overstocking.

Inventory Management Strategies

Just-in-Time (JIT) inventory system: Maintain minimal inventory levels and order supplies just in time to meet customer demand.
Economic Order Quantity (EOQ) model: Calculate the optimal order quantity to minimize total inventory costs.
ABC analysis: Classify inventory into three categories based on value and importance: A (high value, high importance), B (medium value, medium importance), and C (low value, low importance).

Inventory Management Techniques

Forecasting: Use historical data and statistical methods to predict future demand.
Lead time management: Manage the time between ordering and receiving inventory to minimize stockouts and overstocking.
Buffer stock management: Maintain a safety stock to protect against stockouts and uncertainties.

Inventory Management Performance Metrics

Inventory turnover: The number of times inventory is sold and replaced during a period.
Inventory days supply: The number of days inventory will last at current sales rates.
Fill rate: The percentage of customer demand that is met from existing inventory.