Dependent Demand Economic Order Quantity Independent Demand Inventory Order Cycle Ordering Costs Quantity Discounts Reorder Point Safety Stock Service Level Shortage Costs Stockout Inventory Management Think now of as many examples as you can of the types of inventory different businesses maintain and to identify the different purposes of inventory. You should also distinguish types of inventory that are required and those that simply serve as a mask for production problems, poor management and poor quality.
Inventory costs money and in many ways, defeats the quality goals of organizations.
Of course, inventory management is a balancing act between stockout and ordering costs versus the costs of carrying or holding inventory. You should also identify examples of dependent and independent demand items. For example, the demand for airline tickets is independent whereas the demand for airplanes is dependent. Also, the degree to which an item is critical depends on its annual dollar volume. First calculate the annual dollar volume for each Item as shown below.