Managing Inventories: What Is the Appropriate Order Quantity?

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Note

Reference no. UVA-OM-1006

Subject category: Production and Operations Management

Authors: Robert D Landel (Darden School of Business, University of Virginia); James R Freeland (Darden School of Business, University of Virginia)

Published by: Darden Business Publishing

Originally published in: 2003

Version: January 2004

Length: 11 pages

Data source: Generalised experience

Topics: Economic order quantity; Inventory management; Relevant costs

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Abstract

The purpose of this note is to address the planning of the decisions that guide a firm''s decisions regarding cycle stock ordering activities as materials flow from suppliers through a firm''s operations to customers. The objective is to develop and implement a management system that can improve the cost effectiveness of the investments in inventory. This note addresses those costs'' element considerations that deal with the ''Cycle stock decisions''. The reorder point system is addressed in a separate technical note ''Managing Inventories: Reorder Point Systems'' (UVA-OM-0936). The periodic reorder system is addressed in ''Technical Note on Managing Inventories: Periodic Review Systems'' (UVA-OM-0975).