Slack, Chambers and Johnston, Operations Management 5 th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007 Chapter 12 Inventory planning and control Source: Corbis

Slack, Chambers and Johnston, Operations Management 5 th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007 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 process Inventory Source: Alamy/Van Hilversum

Slack, Chambers and Johnston, Operations Management 5 th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007 Types of Inventory  Raw Materials  Work in Progress (WIP)  Finished Goods  Equipment and Buildings  Spares

Slack, Chambers and Johnston, Operations Management 5 th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007 Benefits of Inventory  Raw Materials  Work in Progress (WIP)  Finished Goods

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

Slack, Chambers and Johnston, Operations Management 5 th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007 A paper merchant must get its inventory planning and control right

Slack, Chambers and Johnston, Operations Management 5 th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston Class C items Class B items Class A items Pareto curve for stocked items Percentage of types of items Percentage of value of items Source: Howard Smith Paper Group

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