Matching inventory to demand
To start our inventory planning journey, imagine that we have the following demand forecast for a product:
|#||Month 1||Month 2||Month 3||Month 4||Month 5||Month 6||Total|
|Forecasted sales (units)||4||5||7||3||4||6||29|
Also assume we have
no stock on hand, we can get stock from the supplier immediately (i.e. our
lead time = 0) and we can/will only ever place a single order
for this product.
In this case, the amount of stock we need to buy is quite simply the sum of everything that we expect to sell – so
Simple enough… now let’s introduce Stock on Hand.