Inventory management is primarily about specifying the size and placement of stocked goods. Inventory management is required at different locations within a facility or within multiple locations of a supply network to protect the regular and planned course of production against the random disturbance of running out of materials or goods.
The scope of inventory management also concerns the fine lines between replenishment lead time, carrying costs of inventory, asset management, inventory forecasting, inventory valuation, inventory visibility, future inventory price forecasting, physical inventory, available physical space for inventory, quality management, replenishment, returns and defective goods and demand forecasting.
A lead time is the latency (delay) between the initiation and execution of a process. Balancing these competing requirements leads to optimal inventory levels, which is an on-going process as the business needs shift and react to the wider environment. It is common for suppliers operating in batch-production mode to deal with patient and impatient customers. Orders from patient customers can be taken by the supplier and included in the next production cycle, while orders from impatient customers have to be satisfied from the on-hand inventory.
A supplier/manufacturer operating in batch-production mode may deal with two kinds of customers: patient (slow) and impatient (fast) customers. Impatient customers have a shorter operational cycle than the supplier, and patient customers have a longer operational cycle than the supplier.
Therefore, at the time an order is placed, the short lead-time customer is informed if the order is fulfilled immediately; whereas the long lead-time customer is informed whether the order is fulfilled immediately or is going to be fulfilled in the next cycle.
For periodic-review inventory models, a representative result is known as an inventory-rationing policy that defines a static threshold for each customer class which represents the maximum number of orders to be reserved for the corresponding class.
The scope of inventory management also concerns the fine lines between replenishment lead time, carrying costs of inventory, asset management, inventory forecasting, inventory valuation, inventory visibility, future inventory price forecasting, physical inventory, available physical space for inventory, quality management, replenishment, returns and defective goods and demand forecasting.
A lead time is the latency (delay) between the initiation and execution of a process. Balancing these competing requirements leads to optimal inventory levels, which is an on-going process as the business needs shift and react to the wider environment. It is common for suppliers operating in batch-production mode to deal with patient and impatient customers. Orders from patient customers can be taken by the supplier and included in the next production cycle, while orders from impatient customers have to be satisfied from the on-hand inventory.
A supplier/manufacturer operating in batch-production mode may deal with two kinds of customers: patient (slow) and impatient (fast) customers. Impatient customers have a shorter operational cycle than the supplier, and patient customers have a longer operational cycle than the supplier.
Therefore, at the time an order is placed, the short lead-time customer is informed if the order is fulfilled immediately; whereas the long lead-time customer is informed whether the order is fulfilled immediately or is going to be fulfilled in the next cycle.
For periodic-review inventory models, a representative result is known as an inventory-rationing policy that defines a static threshold for each customer class which represents the maximum number of orders to be reserved for the corresponding class.