Operations Management: An Integrated Approach, 5th Edition

THE SUPPLY CHAIN LINK

Inventory management deals with economically based item-replenishment policies, safety stock levels, and the appropriate review system for use within a supply chain. Inventory flows from the suppliers to the manufacturers to the distributors. Inventory management provides an understanding of the total costs of inventory as well as the customer service ramifications of specific policies. By themselves, uncoordinated replenishment policies can cause the bullwhip effect (discussed in Chapter 4) in the supply chain. Vendor-managed inventory is one approach committed to improving service levels while reducing inventory investment in the supply chain. A policy of making demand information available (point-of-sale information) to all members of the supply chain reduces demand uncertainty and allows a company to achieve its desired customer service levels with a smaller inventory investment. Inventory management is a key component of effective supply chain performance.