Question

How do you set inventory policy parameters if inventory build‐up is unnecessary?

Answer 1

The lot-for-lot policy can be used for the purpose of inventory setting as in this system actual demand on the basis of anticipated demand from forecast and blanket orders is determined and then settle the order quantity based on the demand.

Moreover, policies like Just in Time where inventory is purchased just when required for production can be followed.

Time Bucket approach can also be used which sets limits on when an existing supply order should be rescheduled to meet a given demand. If the supply lies within the time bucket, it will be rescheduled in or out to meet the demand. Otherwise, if it lies earlier, it will cause unnecessary build-up of inventory and should be canceled. If it lies later, a new supply order will be created instead.