- inventory: stocks / items used to support production (raw materials / work-in-process items),
supporting activities (maintenance / repair / operating supplies) and customer service (finished
goods / spare parts)
- inventory management is still an important function, even in the Internet age
- inventory is both a valuable resource and a potential source of waste
11.1 The Role of Inventory
I n v e n t o r y Ty p e s
- cycle stock: components / products that are (I) (III)
received in bulk by a downstream partner, Inventory level
gradually used up, and then replenished again in
(II)
bulk by the upstream parter 1 (g Figure 1):
(I) Order received
(II) Inventory drawn down gradually
(III) Another order received Time
- safety stock: extra inventory that companies hold to Figure 1: cycle stock
protect themselves against uncertainties in either
demand levels or replenishment times (g Figure 2): (I) (III)
(I) Order received
Inventory level
(II) Inventory drawn down gradually (II)
(III) Another order received
- anticipation inventory: inventory that is held in
Safety stock
anticipation of customer demand
- hedge inventory: inventory, buildup to buffer Time
against some event that may not happen 2 Figure 2: safety stock
- transportation inventory: inventory that is moving
from one link to another in the s.c.
- smoothing inventory: inventory that is used to smooth out differences between upstream production
levels and downstream demand
1 often thought of as active inventory because companies are constantly using it up and their suppliers constantly replenishing it
2 hedge inventory planning involves a.o.: potential labor strikes, price increases, unsettled governments,...
- 68 - Jannis Mertens
supporting activities (maintenance / repair / operating supplies) and customer service (finished
goods / spare parts)
- inventory management is still an important function, even in the Internet age
- inventory is both a valuable resource and a potential source of waste
11.1 The Role of Inventory
I n v e n t o r y Ty p e s
- cycle stock: components / products that are (I) (III)
received in bulk by a downstream partner, Inventory level
gradually used up, and then replenished again in
(II)
bulk by the upstream parter 1 (g Figure 1):
(I) Order received
(II) Inventory drawn down gradually
(III) Another order received Time
- safety stock: extra inventory that companies hold to Figure 1: cycle stock
protect themselves against uncertainties in either
demand levels or replenishment times (g Figure 2): (I) (III)
(I) Order received
Inventory level
(II) Inventory drawn down gradually (II)
(III) Another order received
- anticipation inventory: inventory that is held in
Safety stock
anticipation of customer demand
- hedge inventory: inventory, buildup to buffer Time
against some event that may not happen 2 Figure 2: safety stock
- transportation inventory: inventory that is moving
from one link to another in the s.c.
- smoothing inventory: inventory that is used to smooth out differences between upstream production
levels and downstream demand
1 often thought of as active inventory because companies are constantly using it up and their suppliers constantly replenishing it
2 hedge inventory planning involves a.o.: potential labor strikes, price increases, unsettled governments,...
- 68 - Jannis Mertens
