ECON 1 Lecture 12:
Document Summary
Inventory: stocks or items used to support production (raw materials and wip items), supporting activities (maintenance, repair, and operating supplies) and customer service (finished goods and spare parts). Managers have a love-hate relationship with inventory; some suggest that the fewer inventories there are, the better. Inventory is both a valuable resource and a potential source of waste. Two of the most common types of inventory: Cycle stock: components or products that are received in bulk by a downstream partner, gradually used up, and then replenished again in the bulk by upstream partners. In other words: a firm order a large quantity of components and uses then little by little until it the firm runs down of components, the firm will then place a new order again. Safety stock: extra inventory that companies hold to protect themselves against uncertainty in either demand levels or replenishment time. It is stock that is kept extra just in case.
