Supply Chain Management for Engineers

4

Satisfying Customer Demand: Inventory Management

4.1  Overview

Inventory is a quantity of product units held by a company for some time to satisfy customer demand. It is a buffer between the supply and demand processes. The supply process contributes product units to the inventory, whereas the demand process depletes the same inventory. Inventory is necessary because of differences in rates and timing between supply and demand. Inventory management aims to determine the appropriate level of inventory held by a company. It is an important factor that impacts supply chain profitability and competitiveness. A number of factors influence the appropriate level of inventory. These factors are summarized as follows:

•  Economies of scale ...