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Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007

Chapter 12

Inventory planning and control

Source: Corbis


Inventory is created to compensate for the differences in timing between supply and demand

Rate of supply from input process

Rate of demand from output processInventory

Source: Alamy/Van Hilversum


Types of Inventory Raw Materials

Work in Progress (WIP)

Finished Goods

Equipment and Buildings

Spares


Benefits of Inventory

Raw Materials

Work in Progress (WIP)

Finished Goods


Expense of Inventory


A paper merchant must get its inventory planning and control right


100

90

80

70

60

50

40

30

20

10

100908070605040302010

Class C items

Class B items

Class A items

Pareto curve for stocked items

Percentage of types of items

Pe

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of v

alu

e o

f ite

ms

Source: Howard Smith Paper Group


Inventory classifications and measures

Class A items – the 20% or so of high-value items which account for around 80% of the total stock value

Class B items – the next 30% or so of medium-value items which account for around 10% of the total stock value

Class C items – the remaining 50% or so of low-value items which account for around the last 10% of the total stock value

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