The Role of Cycle Inventory in a Supply Chain

FIGURE 11-1 Inventory Profile of Jeans at Jean-Mart 

Q Quantity in a lot or batch size D Demand per unit time 

we ignore the impact of demand variability and assume that demand is stable. In Chapter 12, we introduce demand variability and its impact on safety inventory. 

When d and is steady, eyele inventory and lot size are related as follows  

For a lot size of 1,(XX) units, Jean-Mart earries a eyele inventory of QI2 = 500 pairs of jeans. From Equation 11.1, we see that eyele inventory is proportional to the lot size. A supply ehain in which stages produce or purehase in larger lots has more cyele inventory than a supply ehain in which stages produce and purehase in smaller lots. For example, if a eompeting department store with the same dmand purehases in lot sizes of 200 pairs of jeans, it will carry a cycle inventory of only 100 pairs of jeans. 

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