An inventory policy should answer questions about when to order and how much to order.
What is an inventory policy?
- Inventory policies are a way to determine what is the best way a product can flow through a supply chain. They are a set of rules establishing how much and when a product should be bought or produced.
- Inventory policies are important to manage time, demand and uncertainties in a supply chain. With a well-adjusted policy, companies can be more agile, efficient and profitable.
- It’s hard to predict every little detail that can go wrong in the process, therefore, these set of rules established by an inventory policy will, at the very least, help deal with those problems.
- Those policies must take care of three main levels of inventory decisions. Primarily, they must deal with strategic decisions in the supply chain, like: What are the potential alternatives to inventory? How the product is designed?
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