Lecture Outline
          • Elements of Inventory Management – Slide 4
          • Inventory Control Systems – Slide 10
          • Economic Order Quantity Models – Slide 15
          • Quantity Discounts – Slide 33
          • Reorder Point – Slide 38
          • Order Quantity for a Periodic Inventory System – 
                Slide 49
          © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e                                                                   13-2
                      Learning Objectives
     •  Explain why companies keep inventory and how advances in  IT 
        have impacted  inventory decisions
     •  Discuss the key elements and costs of  inventory, and the 
        relationship between inventory costs and customer service
     •  Contrast continuous and periodic inventory systems, and 
        classify inventory according to the ABC system
     •  Utilize basic inventory models to calculate order quantity and 
        related measures, as well as the annual cost of inventory
     •  Determine the appropriate reorder point in a continuous 
        inventory system based on a target service level
     •  Calculate the order quantity for a periodic inventory system
     © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e    13-3
                                               What Is Inventory?
          • Stock of items kept to meet future demand
          • Purpose of inventory management
                  • how many units to order
                  • when to order
          © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e                                                                   13-4
                                Supply Chain Management
          • Bullwhip effect
                  • demand information is distorted as it moves away 
                       from the end-use customer
                  • higher safety stock inventories to are stored to 
                       compensate
          • Seasonal or cyclical demand
          • Inventory provides independence from vendors
          • Take advantage of price discounts
          • Inventory provides independence between 
                stages and avoids work stoppages
          © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e                                                                   13-5
                 Quality Management in the Supply Chain
          • Customers usually perceive quality service as 
                availability of goods they want when they want 
                them
          • Inventory must be sufficient to provide high-
                quality customer service in QM
          © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e                                                                   13-6