I. INTRODUCTION
Inventory management is a core operations management activity. It is the active control program which allows the management of sales, purchases and payments. Good inventory management is essential for the successful operation of most businesses and their supply chains. Poor inventory management hampers operations, diminishes customer satisfaction and increases operating costs. Therefore, firms – from manufacturing to wholesale to retail – are intensifying their search for more efficient and effective inventory management approaches to minimize not only their direct investments in purchased goods inventory but also the indirect costs incurred in managing such inventory.
This term paper focuses on comparison of different inventory management approaches; decision of determining how much inventory to order and when to order and the effects of inventory management.
II. LITERATURE REVIEW
In the paper “What is the ‘right’ inventory management approach for a purchased item?”, it identified and explained the critical factors that drive the decision of how a firm should decide which of four choices – i.e. inventory speculation, inventory postponement, inventory consignment, and reverse inventory consignment – is most appropriate to adopt for a given purchased item in a particular context. The factors are customer demand or usage requirements, nature of the supply line and bargaining power of a firm relative to the supplier. As for “Reconstructing inventory management theory”, practical inventory control systems are discussed and reconstructed, proposing an alternative “top down” approach. Lastly, “Positive vs. Negative Externalities in Inventory Management: Implications for Supply Chain Design” analyzes the impact of supply-side externa ...