Integral Logistics Management — Operations Management and Supply Chain Management Within and Across Companies

11.1 Stores and Inventory Management

Intended learning outcomes: Present characteristic features of stores management. Produce an overview on inventory transactions. Describe physical inventory and inventory valuation.


Inventory is one of the most important instruments of logistics planning & control. Although inventory of work-in-process items is sometimes linked to the production process, such physical inventory as well as stored inventory is — from the standpoint of value adding — often unnecessary (considered a non-value added or a waste) and costly in terms of time and money (tied-up capital). As discussed in Section 1.1.3, inventory is unavoidable if customer tolerance time is shorter than the cumulative lead time. A further reason for stockkeeping, however, lies in planning & control itself. Stocks provide for the storage of goods over time. They create degrees of freedom that allow for the matching of capacity (humans, machines, tools) to the demand for goods.


Course section 11.1: Subsections and their intended learning outcomes

  • 11.1 Stores and Inventory Management

    Intended learning outcomes: Present characteristic features of stores management. Produce an overview on inventory transactions. Describe physical inventory and inventory valuation.

  • 11.1.1 Characteristic Features of Stores Management

    Intended learning outcomes: Present in detail characteristic features such as storage location ID, storage type, valuation basis, stock organization, embedding in the flow of goods, storage management principle, inventory issuance principle, and inventory control principle.

  • 11.1.2 Inventory Transactions

    Intended learning outcomes: Differentiate between perpetual inventory and book inventory. Produce an overview on the sources of planned and actual inventory transactions.

  • 11.1.3 Physical Inventory and Inventory Valuation

    Intended learning outcomes: Identify physical inventory, inventory adjustment, and inventory valuation. Present an example of a stock inventory list. Differentiate between the periodic physical inventory procedure and the cycle counting procedure.



Course 11: Sections and their intended learning outcomes

  • 11.3 Order Point Technique and Safety Stock Calculation

    Intended learning outcomes: Explain the order point technique and variants thereof. Describe the safety stock calculation with continuous demand. Disclose the determination of the service level and the relation of service level to fill rate.

  • 11.4 Batch Sizing, or Lot Sizing

    Intended learning outcomes: Produce an overview on production or procurement costs, batch-size-dependent unit costs, setup and ordering costs, and carrying cost. Explain optimum batch size, optimum length of order cycle, the classic economic order quantity formally and in practical application. Disclose extensions of the batch size formula.

  • 11.5 Summary

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  • 11.6 Keywords

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  • 11.7 Scenarios and Exercises

    Intended learning outcomes: Calculate examples for the ABC Classification and for the combined ABC-XYZ classification. Differentiate between Safety Stock Variation and Demand Variation. Determine batch size depending on stockout costs. Assess the effectiveness of the order point technique.

  • 11.8 References

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