Inventory Levels

Since inventory carrying costs can contribute significantly to total costs, there is a need to carry just about enough inventory to satisfy the customer demands. Inventories held in a supply chain belong to four categories [#!factory96!#]: Raw materials, work-in-process (unfinished and semi-finished parts), finished goods inventory, and spare parts. Each type of inventory is held for different reasons and there is a need to keep optimal levels of each type of inventory. Thus measuring the actual inventory levels will provide a useful picture of system efficiency.