Inventory Management: Information, Coordination and Rationality1

The success of a product in today’s global marketplace depends on capabilities of firms in the product’s supply chain. Among these capabilities, effective inventory management is a capability necessary to lead in the global marketplace. The chapter provides a discussion of four fundamentals of effective inventory management. First, it requires managers to know how best to use available information. Second, managers need to quantify the value of information. Third, they need to coordinate decentralized inventory operations. Finally, effective inventory management requires decision tools that can be embraced by their users. The chapter’s emphasis is on the use of information, and the role of new information technologies in inventory management. Previous research on inventory management played an important role in the advancement and development of new technologies and processes. Today more research is needed because new technologies (such as RFID Radio-Frequency Identification) and new management methods (such as collaborative forecasting and planning) are emerging and evolving faster than ever before. Inventory management and research will continue to play a central role in the success of a product and the firms in its supply chain. The chapter brings together separate but inherently related streams of research in inventory management. By doing so, we highlight potential research opportunities that lie on the boundaries. This manuscript will appear in the Handbook of Production Planning. (Eds) K. Kempf, P. Keskinocak and R. Uzsoy.