Managing inventory

- [Narrator] Supply chain management is all about matching supply with demand. And sometimes the best way to satisfy your customers demand is by having products on hand. But, inventory is expensive. (register chiming) So, how do we decide how much inventory we should have? Well, it turns out, there are two factors that we need to take into account. Cycle stock and safety stock. It'll make more sense if I explain with an example. So, let's say that you work in a grocery store and you buy oranges by the pallet load. But, your customers only buy a few oranges at a time. So, when you buy a pallet, that becomes your inventory. Then, each time your customers buy some oranges, your inventory level gets a little lower. Eventually, your inventory will get so low, that you'll buy another pallet of oranges. And that cycle will repeat. So, there's your cyclical pattern. Your inventory goes up quickly when you receive a new shipment and it goes down slowly as customers buy your products. So, we…