Table Of ContentPRAISE FOR
THE INVENTORY TOOLKIT
‘Essential reading for companies with complex operations and supply chains that
cannot rely on traditional techniques alone. The KCM methodology will cater for
demand variation and recognise the need to categorise demand to fully optimize
inventory.’
Colin Mills, CEO, Acenta Steel Ltd
‘Increasingly within organizations inventory management is treated as a “black
box” activity, hidden within the computer algorithms. Practitioners however need
to understand the foundational basics of what occurs within the “black box”,
otherwise sub-optimization and margin erosion can occur within an organization.
The Inventory Toolkit provides an accessible insight into how effective inventory
management needs to pervade a business, connecting strategy to shop floor.
It provides insights into the tools, approaches and algorithms used in the
inventory “black box”. It also provides a useful perspective for anyone reviewing
or implementing modern inventory management approaches.’
Professor Richard Wilding OBE, Professor of Supply Chain Strategy,
Cranfield School of Management
‘The Inventory Toolkit provides an invaluable and practical set of tools which will
help you drive strong, achievable and ongoing improvements to a business’s key
performance indicators. Geoff Relph and Catherine Milner use theory balanced
with insightful case studies from a number of businesses to demonstrate how the
user can make informed decisions in key areas such as managing and controlling
cost and understanding the different impacts of both good and bad inventory.
The book will be of value to those in further education as well as those already
in business.’
Paul Buxton, guest lecturer at WMG, University of Warwick
‘Every inventory manager worth their salt should be working with this book.
It has a thorough explanation of the history of inventory management analysis
tools, what they do and how to use them. The Excel examples with formulas are
excellent and raises the bar for inventory analysis texts.’
Sophie Damoglou, Stock and Logistics Manager, Icomera UK Ltd
‘Rightsizing inventory buffers is critical for companies to deliver desired customer
service levels at lowest supply chain cost. The Inventory Toolkit provides a practical
approach to achieve this. An essential read for all operations management
professionals.’
Professor Janet Godsell, Professor of Operations and Supply Chain Strategy,
University of Warwick
‘The Inventory Toolkit is an insightful and practical read. There are tips and tools
that can be implemented to support and improve inventory control, as well as
practical examples from across our industry. A very interesting read for anyone
looking at their end-to-end supply chain with a view to optimizing inventory
control.’
Paul Daniel, guest lecturer at WMG, University of Warwick
2nd Edition
The Inventory Toolkit
Business systems solutions
Geoff Relph
Catherine Milner
Publisher’s note
Every possible effort has been made to ensure that the information contained in this book is accurate
at the time of going to press, and the publishers and authors cannot accept responsibility for any errors
or omissions, however caused. No responsibility for loss or damage occasioned to any person acting,
or refraining from action, as a result of the material in this publication can be accepted by the editor,
the publisher or the authors.
First published in Great Britain and the United States in 2015 by Kogan Page Limited as Inventory Management
Second edition published 2019
Apart from any fair dealing for the purposes of research or private study, or criticism or review, as permitted
under the Copyright, Designs and Patents Act 1988, this publication may only be reproduced, stored or
transmitted, in any form or by any means, with the prior permission in writing of the publishers, or in the
case of reprographic reproduction in accordance with the terms and licences issued by the CLA. Enquiries
concerning reproduction outside these terms should be sent to the publishers at the undermentioned
addresses:
2nd Floor, 45 Gee Street 122 W 27th St, 10th Floor 4737/23 Ansari Road
London New York, NY 10001 Daryaganj
EC1V 3RS USA New Delhi 110002
United Kingdom India
www.koganpage.com
© Geoff Relph and Catherine Milner, 2015, 2019
The right of Geoff Relph and Catherine Milner to be identified as the authors of this work has been asserted
by them in accordance with the Copyright, Designs and Patents Act 1988.
ISBNs
Hardback 978 1 78966 007 4
Paperback 978 0 7494 8212 1
Ebook 978 0 7494 8213 8
British Library Cataloguing-in-Publication Data
A CIP record for this book is available from the British Library.
Library of Congress Cataloging-in-Publication Number
2019013111
Typeset by Hong Kong FIVE Workshop
Print production managed by Jellyfish
Printed and bound by CPI Group (UK) Ltd, Croydon, CR0 4YY
This book is dedicated to June and Simon,
our patient other halves.
Our thanks to all the staff at Kogan Page for their help and
support during the process of writing this book.
Also our thanks to all the case study sources for
granting permission to quote them in the book.
CONTENTS
Introduction 1
01 Introduction to inventory management 7
Introduction 7
Inventory and inventory management 9
The three pillars of inventory management 12
Inventory planning pyramid 18
Management of inventory in business systems 22
The cost of inventory and the ability to react to change 27
Inventory management in the supply chain 30
Inventory management in the extended supply chain and the ‘Beer
Game’ 31
Five milestones 33
Summary 34
References 35
02 Business systems and business 36
Introduction 36
The business 36
Business system development 42
The building blocks of MRPI, MRPII and ERP 47
ERP implementation and management 70
Summary 77
References 78
You do the maths 80
03 Inventory balancing and control 92
Introduction 92
Process, organization and technology (POT) 94
Lean and Just in Time (JIT) 96
Inventory balancing 104
Inventory control 110
Extending beyond your company 129
viii Contents
Summary 140
Tools and techniques discussed in this chapter 141
References 142
You do the maths 143
04 The complexity of inventory management within business
systems 153
Introduction 153
Inventory planning at its simplest 154
Complexity in managing inventory in MRPI and MRPII 165
Measuring success 175
Summary 179
Tools and techniques discussed in this chapter 180
References 180
You do the maths 181
05 Stack and flow inventories 193
Introduction 193
Optimization of stack and flow inventories 195
Inventory flow 203
Financial planning: strategic, tactical and operational 218
Summary 229
Tools and techniques discussed in this chapter 230
References 230
You do the maths 230
06 Traditional thinking in inventory optimization 236
Introduction 236
Inventory saw-tooth 237
Determining the order size 238
Protecting against supply and demand issues 247
Normal distribution and Poisson distribution 248
Normal distributions roles in safety stock 249
Parts classification 261
Using Pareto to plan inventory using cycle and safety stock 265
Developing a plan that will succeed 274
Summary 279
Tools and techniques discussed in this chapter 280
Contents ix
References 281
You do the maths 281
07 k-curve methodology 285
Introduction 285
History of k-curve 287
Generating a k-curve 290
Why is it so useful? 301
Creating a composite curve 306
Testing the different options for inventory classes 314
Summary 319
Tools and techniques discussed in this chapter 320
References 321
You do the maths 321
08 The practical application of k-curve 326
Introduction 326
Understand your current inventory position:
how much have I got? 329
Determine the business targets that relate to inventory:
what do I have to achieve? 345
Creating inventory plan: how difficult will this be and what must
I do? 351
Implement the plan: what actions must I do to achieve the
plan? 368
Summary 379
Tools and techniques discussed in this chapter 380
References 380
09 Case study examples of k-curve planning approach 381
Introduction 381
Exchange curve/k-curve case studies 382
Summary of case studies and lessons learnt 390
Software applications 392
Amis-delta 393
Parameter alignment tools and techniques 394
Summary 397
Tools and techniques discussed in this chapter 397
References 398
