Inventory Management in the Supply Chain

Abstract

Inventory management has received considerable attention in recent years; this is due to three major factors. First, a worldwide recession has had the impact of reducing sales volumes and revenues, and this has forced management to consider how best to lower the levels of inventory within logistics systems in order to maintain margins (by reducing interest and obsolescence costs). Secondly, the changes in manufacturing philosophy, specifically the growth in just-in-time applications (JIT), has reduced the need for inventory as an insurance buffer within the overall logistics activity. A third influence, one which is associated with the first topic, is the realization by many companies that a greater return-on-investment (ROI) can be obtained by developing the core business, and that investment in working capital items, such as inventory and debtors, returns far less in comparison.