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Dynamic Inventory Models: Aggregate Analysis

In: Materials Management

Author

Listed:
  • Prem Vrat

    (ITM University)

Abstract

This chapter presents an aggregate macro-view of inventory analysis. The concept of exchange curve (optimal policy curve) is introduced which suggests that a rational inventory policy should strike a trade-off between total inventory and total number of orders. This could be used to quickly detect if the present policy is rational or not. If not, the coverage analysis is then used to rationalize the inventory policy for individual items. Coverage analysis in conjunction with exchange curve is proposed to be a good starting point for inventory rationalization. Such a macro-level analysis will reveal the potential benefits of inventory control before the exercise is undertaken. Coverage analysis is a rough but ready answer to inventory rationalization even without inventory-related cost data.

Suggested Citation

  • Prem Vrat, 2014. "Dynamic Inventory Models: Aggregate Analysis," Springer Texts in Business and Economics, in: Materials Management, edition 127, chapter 5, pages 67-79, Springer.
    • Handle: RePEc:spr:sptchp:978-81-322-1970-5_5
    DOI: 10.1007/978-81-322-1970-5_5
    as

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