Wednesday, July 30, 2008

Inventory management theory

Anyone familiar with distribution over the last several decades has been privy to the financial theory of inventory management. The foremost measure is the turn-and-earn theory of inventory management.
Much of inventory management historically has focused on a single performance statistic, increasing turns. Modern enterprise resource planning (ERP) systems deliver reasonably complex forecasting and economic order quantity (EOQ) calculations, which enhance buy-side management and maximize turns.
Both turn-and-earn indices and GMROI are common metrics formed from the inventory management school of wholesaling.A little known detriment of the attention to inventory management is that company officers look at the asset base and buy-side costs and don’t focus on creating value in the market place.
Inventory management is a critical component of an efficient supply chain that, in turn, can be the fulcrum for success in the business.

No comments: