Evolving production technologies: Implications for inventory ordering formulations

Evolving production technologies are altering the cost structures on which many supporting inventory ordering systems are based; for example, fixed costs compared with variable costs are increasing significantly. Unfortunately, many inventory ordering formulations consider only the variable portions of inventory ordering costs and inventory holding costs. To address this deficiency, departs from traditional categorizations and offers an inventory classification schema based on the functional roles served by the inventory items. Functional roles of inventory include transition, buffer, investment, maintenance, supplies and dead stock. Extending the schema, assesses the implications each functional role has for inventory cost containment, emphasizing the impact of evolving production technologies on inventory ordering policies and their relevance to functional roles.