Inventory theoryMaterial theory (or more formally the mathematical theory of inventory and production) is the sub-specialty within operations research and operations management that is concerned with the design of production/inventory systems to minimize costs: it studies the decisions faced by firms and the military in connection with manufacturing, warehousing, supply chains, spare part allocation and so on and provides the mathematical foundation for logistics.
InventoryInventory (American English) or stock (British English) refers to the goods and materials that a business holds for the ultimate goal of resale, production or utilisation. Inventory management is a discipline primarily about specifying the shape and placement of stocked goods. It is required at different locations within a facility or within many locations of a supply network to precede the regular and planned course of production and stock of materials.
Inventory controlInventory control or stock control can be broadly defined as "the activity of checking a shop's stock". It is the process of ensuring that the right amount of supply is available within a business. However, a more focused definition takes into account the more science-based, methodical practice of not only verifying a business's inventory but also maximising the amount of profit from the least amount of inventory investment without affecting customer satisfaction.
Economic order quantityEconomic Order Quantity (EOQ), also known as Financial Purchase Quantity or Economic Buying Quantity (EPQ), is the order quantity that minimizes the total holding costs and ordering costs in inventory management. It is one of the oldest classical production scheduling models. The model was developed by Ford W. Harris in 1913, but R. H. Wilson, a consultant who applied it extensively, and K. Andler are given credit for their in-depth analysis.
Newsvendor modelThe newsvendor (or newsboy or single-period or salvageable) model is a mathematical model in operations management and applied economics used to determine optimal inventory levels. It is (typically) characterized by fixed prices and uncertain demand for a perishable product. If the inventory level is , each unit of demand above is lost in potential sales. This model is also known as the newsvendor problem or newsboy problem by analogy with the situation faced by a newspaper vendor who must decide how many copies of the day's paper to stock in the face of uncertain demand and knowing that unsold copies will be worthless at the end of the day.
Vendor-managed inventoryVendor-managed inventory (VMI) is an inventory management practice in which a supplier of goods, usually the manufacturer, is responsible for optimizing the inventory held by a distributor. Under VMI, the retailer shares their inventory data with a vendor (sometimes called supplier) such that the vendor is the decision-maker who determines the order size, whereas in traditional inventory management, the retailer (sometimes called distributor or buyer) makes his or her own decisions regarding the order size.
Operations managementOperations management is an area of management concerned with designing and controlling the process of production and redesigning business operations in the production of goods or services. It involves the responsibility of ensuring that business operations are efficient in terms of using as few resources as needed and effective in meeting customer requirements. It is concerned with managing an entire production or service system which is the process that converts inputs (in the forms of raw materials, labor, consumers, and energy) into outputs (in the form of goods and/or services for consumers).
Inventory management softwareInventory management software is a software system for tracking inventory levels, orders, sales and deliveries. It can also be used in the manufacturing industry to create a work order, bill of materials and other production-related documents. Companies use inventory management software to avoid product overstock and outages. It is a tool for organizing inventory data that before was generally stored in hard-copy form or in spreadsheets.
Inventory turnoverIn accounting, the inventory turnover is a measure of the number of times inventory is sold or used in a time period such as a year. It is calculated to see if a business has an excessive inventory in comparison to its sales level. The equation for inventory turnover equals the cost of goods sold divided by the average inventory. Inventory turnover is also known as inventory turns, merchandise turnover, stockturn, stock turns, turns, and stock turnover.
Field inventory managementField inventory management commonly known as inventory management is the function of understanding the stock mix of a company and the different demands on that stock. The demands are influenced by both external and internal factors and are balanced by the creation of purchase order requests to keep supplies at a reasonable or prescribed level. Inventory management is important for every other business enterprise.
Supply chain managementIn commerce, supply chain management (SCM) deals with a system of procurement (purchasing raw materials/components), operations management (ensuring the production of high-quality products at high speed with good flexibility and low production cost), logistics and marketing channels, so that the raw materials can be converted into a finished product and delivered to the end customer.
Supply chainA supply chain, sometimes expressed as a "supply-chain", is a complex logistics system that consists of facilities that convert raw materials into finished products and distribute them to end consumers or end customers. Meanwhile, supply chain management deals with the flow of goods within the supply chain in the most efficient manner. In sophisticated supply chain systems, used products may re-enter the supply chain at any point where residual value is recyclable. Supply chains link value chains.
CostIn production, research, retail, and accounting, a cost is the value of money that has been used up to produce something or deliver a service, and hence is not available for use anymore. In business, the cost may be one of acquisition, in which case the amount of money expended to acquire it is counted as cost. In this case, money is the input that is gone in order to acquire the thing. This acquisition cost may be the sum of the cost of production as incurred by the original producer, and further costs of transaction as incurred by the acquirer over and above the price paid to the producer.
Opportunity costIn microeconomic theory, the opportunity cost of a choice is the value of the best alternative forgone where, given limited resources, a choice needs to be made between several mutually exclusive alternatives. Assuming the best choice is made, it is the "cost" incurred by not enjoying the benefit that would have been had by taking the second best available choice. The New Oxford American Dictionary defines it as "the loss of potential gain from other alternatives when one alternative is chosen.
Marginal costIn economics, the marginal cost is the change in the total cost that arises when the quantity produced is incremented, the cost of producing additional quantity. In some contexts, it refers to an increment of one unit of output, and in others it refers to the rate of change of total cost as output is increased by an infinitesimal amount. As Figure 1 shows, the marginal cost is measured in dollars per unit, whereas total cost is in dollars, and the marginal cost is the slope of the total cost, the rate at which it increases with output.
Dynamic lot-size modelThe dynamic lot-size model in inventory theory, is a generalization of the economic order quantity model that takes into account that demand for the product varies over time. The model was introduced by Harvey M. Wagner and Thomson M. Whitin in 1958. We have available a forecast of product demand dt over a relevant time horizon t=1,2,...,N (for example we might know how many widgets will be needed each week for the next 52 weeks).
LogisticsLogistics is a part of supply chain management that deals with the efficient forward and reverse flow of goods, services, and related information from the point of origin to the point of consumption according to the needs of customers. Logistics management is a component that holds the supply chain together. The resources managed in logistics may include tangible goods such as materials, equipment, and supplies, as well as food and other consumable items.
PolicyPolicy is a deliberate system of guidelines to guide decisions and achieve rational outcomes. A policy is a statement of intent and is implemented as a procedure or protocol. Policies are generally adopted by a governance body within an organization. Policies can assist in both subjective and objective decision making. Policies used in subjective decision-making usually assist senior management with decisions that must be based on the relative merits of a number of factors, and as a result, are often hard to test objectively, e.
Poisson distributionIn probability theory and statistics, the Poisson distribution is a discrete probability distribution that expresses the probability of a given number of events occurring in a fixed interval of time or space if these events occur with a known constant mean rate and independently of the time since the last event. It is named after French mathematician Siméon Denis Poisson ('pwɑːsɒn; pwasɔ̃). The Poisson distribution can also be used for the number of events in other specified interval types such as distance, area, or volume.
Public policyPublic policy is an institutionalized proposal or a decided set of elements like laws, regulations, guidelines, and actions to solve or address relevant and real-world problems, guided by a conception and often implemented by programs. The implementation of public policy is known as public administration. Public policy can be considered to be the sum of a government's direct and indirect activities and has been conceptualized in a variety of ways. They are created and/or enacted on behalf of the public typically by a government.
