Encyclopedia of Operations Research and Management Science

2013 Edition
| Editors: Saul I. Gass, Michael C. Fu

Inventory Modeling

  • Edward A. Silver
  • David F. Pyke
Reference work entry
DOI: https://doi.org/10.1007/978-1-4419-1153-7_479

Introduction

Supply chains have simultaneously become increasingly globalized and lean. As a result, costs have often decreased dramatically, but at the expense of increased complexity and risk. A virus outbreak in Asia can shut down a factory in Cleveland, and a volcano in Iceland can shutter automotive factories in Spain and Germany. These developments suggest that excellent inventory management and control are critical to effective management of supply chains. Managers need to understand the optimal amount of inventory to hold in stable situations, as well as in highly dynamic and uncertain environments. The tendency is often to hold too much inventory, and thus to avoid stockouts and the resulting fallout that lands on inventory managers. Companies, however, are also confronted with the cost of inventory in the form of reduced working capital that could be used for other profitable activities such as new product innovation or paying down debt. How should managers handle this...

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Copyright information

© Springer Science+Business Media New York 2013

Authors and Affiliations

  1. 1.Haskayne School of BusinessUniversity of CalgaryCalgaryCanada
  2. 2.School of Business AdministrationUniversity of San DiegoSan DiegoUSA