Every day, distributors have the challenge of balancing supply with demand. Affected by worldwide manufacturing activity, consumer demand, and competition, distributors must anticipate accurately or risk a warehouse full of excess inventory. At the same time, they must look for opportunities to for new markets and new suppliers (local and abroad), while working on ways to streamline operations, control costs, and provide good customer service through efficient order fulfillment and service after the sale.
This blog defines and compares the three most commonly used inventory control policies. It should be helpful both to those new to the field and also to experienced people contemplating a possible change in their company’s policy. The blog also considers how demand forecasting supports inventory management, choice of which policy to use, and calculation of the inputs that drive these policies.