ABSTRACT
Stocks of materials (inventories) are kept as a buffer against variations in demand and to overcome uncertain supply. This buffer can be regarded as safety stock. Inventory is held along the supply chain in various warehouses, factories (work in process) and retail store shelves. These inventories can cost from a minimum of 15 per cent up to 40 per cent of their value per year (storage space, handling costs, energy costs including heating and refrigeration, stock slippage and insurance). Therefore, careful management of stock levels makes good business sense.
