From the course: Supply Chain and Operations Management Tips

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Optimize your inventory

Optimize your inventory

From the course: Supply Chain and Operations Management Tips

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Optimize your inventory

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- Whether you work in retail, wholesale or manufacturing there's only one thing worse than having too much inventory and that's not having enough. When you run out of inventory you're missing out on sales or you're shutting down a production line. In this video I'll show you two different ways to think about how much inventory you really need. The first way to use inventory is called cycle stock inventory. And it's really about decoupling steps in your supply chain. For example, let's say that a store gets a discount if they buy 10 widgets from their wholesaler. But their customers only buy one widget per day. The store can use cycle stock inventory to decouple these steps. If they order a new shipment once every 10 days, then they should always have one widget in stock to sell to their customers. The amount of money you spend on cycle stock inventory depends on the amount of product you buy at one time. As long as your timing is perfect then the average cycle stock is one half of the…

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