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FUNCTIONS AND DRIVERS OF INVENTORY: Inventory Management Models : A Tutorial


Inventory serves a useful purpose in the supply chain. That said, firms can help minimize the need for inventory by carefully managing those factors that drive inventory levels up.

Functions of Inventory
Four Inventory Drivers

Functions of Inventory

  • Transit stock / pipeline inventory
  • Cycle stock
  • Safety stock (buffer inventory)
  • Anticipation inventory
  • Others
    • Smoothing inventories
  • Hedge inventories

Four Inventory Drivers

  • Demand / Capacity Mismatches
    • Smoothing inventories
    • Demand / Process Volume Mismatches
    • Cycle stocks
    • Demand / Supply Uncertainty
    • Safety stocks
    • Demand / Supply chain lead time mismatches
  • Anticipation inventories