ABSTRACT
This chapter deals with concepts related to inventory analysis and costing. Inventory carrying costs can be classified into three categories as follows: investment costs, storage costs, and costs incurred due to obsolescence or spoilage of existing inventory. Order point inventory systems are applicable to managing inventories of independent demand items. They seek to answer the following questions: How many units of the item should be ordered? and When should we place the order for the units so as to replenish our inventory? In the next section, the authors will investigate the concept of just in time (JIT) manufacturing. The philosophy of JIT is widely used in the Toyota production system. The JIT philosophy uses the following principles in order to minimize inventories: use the pull system of production instead of the push system, reduce the setup time for smaller batch sizes, and develop stable and reliable production operations.
