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APICS Operations Management Body of Knowledge Framework, Third Edition

5.8 Inventory management

Inventory analysis techniques enable a business to manage the trade-off between having too much and not enough inventory on hand. The level of inventory held for independent demand items generally can be estimated by knowing how often inventory is replenished and how much safety stock is held. Cycle stock is the average amount of inventory held due to the periodic replenishment of inventory. Safety stock is the amount of extra inventory kept to reduce the risk of stockout. (See section 5.2.1.)

5.8.1 Turns and days of supply

These are metrics that describe how quickly inventory moves through the organization and through the supply chain. They help manage inventory balances from period to period and assess the impact inventory has on financial statements and Customer Relations.

5.8.2 Cash-to-cash cycle time

This metric is measured in terms of days and describes how long the company or supply chain takes to recover the expenses incurred when buying material, paying labor costs, or otherwise incurring overhead.

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