Inventory serves as a buffer between supply and Inventory demand processes that do not fit neatly together, to mitigate the costly disruptions that would otherwise occur. Example of a nearly supply process: “perfect” supply of cold water to homes Specific Purposes Meet anticipated demand Decouple production & distribution Permits constant production quantities Permit smooth operations through work-in-process (WIP) inventory, i.e. decouples operations Take advantage of quantity discounts Provide hedge against inflation Exploit economies of scale in supply Protect against shortages
Inventory Inventory serves as a buffer between supply and demand processes that do not fit neatly together, to mitigate the costly disruptions that would otherwise occur. Example of a nearly “perfect” supply process: supply of cold water to homes Specific Purposes Meet anticipated demand Decouple production & distribution Permits constant production quantities Permit smooth operations through work-in-process (WIP) inventory, i.e. decouples operations Take advantage of quantity discounts Provide hedge against inflation Exploit economies of scale in supply Protect against shortages
MgtOp-340-Topic-7.docx