Principles and practices of inventory management
Large companies need to manage inventories. The management of manufacturing inventories involves the coordination of inventory-producing (supply) and inventory-consuming activities (demand). Inventory levels are controlled by reorder quantities and levels. Tuning these variables involves taking into account supply and demand. Optimal reorder quantities and levels reduce the total cost, which consists of ordering cost, stock-holding cost, and penalty cost of having no items in stock. The most elementary approach that strikes a balance is the Economic Order Quantity (EOQ) model. Models covering time-varying and stochastic demand are explained intuitively. Heuristic models are included in Material Requirements Planning (MRP) and Just In Time (JIT) approaches.