Inventory
Management 9
© 2014 Pearson Education, Inc. 12 - 1
, Learning Objectives
When you complete this chapter you
should be able to:
1. Conduct an ABC analysis
2. Explain and use cycle counting
3. Explain and use the EOQ model for independent
inventory demand
4. Compute a reorder point and safety stock
5. Apply the production order quantity model
6. Explain and use the quantity discount model
7. Understand service levels and probabilistic inventory
models
© 2014 Pearson Education, Inc. 12 - 2
, Inventory Management
The objective of inventory
management is to strike a balance
between inventory investment and
customer service
© 2014 Pearson Education, Inc. 12 - 3
, Importance of Inventory
▶ One of the most expensive assets of
many companies representing as
much as 50% of total invested capital
▶ Operations managers must balance
inventory investment and customer
service
© 2014 Pearson Education, Inc. 12 - 4
Management 9
© 2014 Pearson Education, Inc. 12 - 1
, Learning Objectives
When you complete this chapter you
should be able to:
1. Conduct an ABC analysis
2. Explain and use cycle counting
3. Explain and use the EOQ model for independent
inventory demand
4. Compute a reorder point and safety stock
5. Apply the production order quantity model
6. Explain and use the quantity discount model
7. Understand service levels and probabilistic inventory
models
© 2014 Pearson Education, Inc. 12 - 2
, Inventory Management
The objective of inventory
management is to strike a balance
between inventory investment and
customer service
© 2014 Pearson Education, Inc. 12 - 3
, Importance of Inventory
▶ One of the most expensive assets of
many companies representing as
much as 50% of total invested capital
▶ Operations managers must balance
inventory investment and customer
service
© 2014 Pearson Education, Inc. 12 - 4
