This course illustrates fundamental forecasting and inventory management
concepts that can be modeled in a spreadsheet context.
The two key outcome variables in inventory management, cycle stock and safety
stock, are determined by nine key input factors, each of which inevitably
changes over time. Sometimes companies focus on the outcomes, and sometimes
they focus on the inputs. This is due, in part, to a lack of understanding of
how all of these components relate to one another and work together.
Furthermore, these factors determine the sales and quantity of on-hand
inventory. If there is too much inventory, it will hurt asset returns and
stock price. If there is too little inventory, then too many stockouts exist
that could impair sales and profitability. This will have the same impact as
an inventory surplus.
This course provides a practical probe into demonstrating how many of the
basic inventory management concepts that participants have learned in other
sessions can be discerned based on insights from a basic modeling perspective.
The modeling will highlight the connection between forecasting and inventory
management and exemplify the comparison between periodic review and continuous
review inventory policies. We will exhibit the need to recognize the
fundamentals of modeling the process, primarily through graphical analysis.
DISCLAIMER: Although Microsoft Office Excel is referenced as a reliable tool
for calculating safety stock in continuous and periodic reviews, its
accessibility is not mandatory for the successful completion of course
After completing this course, you should be able to:
Identify the role of modeling as a practical probe into discerning basic inventory management concepts.
Identify the link between forecasting and cycle stock inventory and the integration of continuous and periodic reviews.
Describe the relationship between forecasting and safety stock inventory and the use of continuous and periodic reviews.
Associate forecasting and stockouts with inventory management and to the synthesis of using continuous and periodic reviews.
Classify the impacts of the forecasting method on cycle stock, safety stock, and stockouts.
Develop a modeling format to create total inventory cost forecasting models of simple replenishment processes.