ABSTRACT
Inventory is a quantity of product units held by a company for some time to satisfy customer demand. Actual customer demand may exceed forecasted demand. Inventory is built up so that customer demand can be met immediately. Inventory ties up capital, requires storage and handling, may need insurance, may incur tax, and may be damaged or become obsolete. The goal of inventory management is to minimize the costs associated with inventory while satisfying customer demand. In business-to-business transactions, suppliers may entice their customers to place larger orders by offering quantity discounts. All-unit discount applies the discounted price to all units, whereas incremental discount applies the discounted price only to those units over the price break quantity. Another measure of product availability is the product fill rate, which is the fraction of product demand that is satisfied from inventory. The level of product availability, commonly measured using cycle service level, is a primary criterion to evaluate the responsiveness of a company.
