Operation Management

I) INTRODUCTION

Inventory Management is one of the most important parts in operation management activities. Good Inventory Management contributes a significant portion to the success of a business, and Expedite Information about inventory on hand together with up-to-date information on demands is important factor that decides the achievement of Inventory Management. In relation to that, this term paper will discuss more detailed about Inventory Management, especially in the light of the need for accurate Information on inventory. Thus, it will provide us the basis understanding about the impacts of accurate and up-to-date Information on Inventory Management; thus determining how much to order and when to order.

Firstly, there is some fundamental knowledge about inventory management to mention. Naturally, among its various functions, inventory serves these most important ones, which are “to meet anticipated customer demand, to smooth production requirements, to decouple operations, to protect against stock outs, to take advantage of order cycles, to hedge against price increase, to permit operations and to take advantage of quantity discounts” (Operations Management International Student Edition With Global Reading-9th edition-William J. Stevenson).

In order for Inventory Management to be effective, the work of keeping track of the inventory on hand and a reliable forecast of demand are two of the basic concerns. How important the Information answering these two concerns and how managers make decisions in reality is the scope of this paper.

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II) LITERATRUE REVIEW

1) THE PRICE OF INFORMATION : INVENTORY MANAGEMENT WITH LIMITED INFORMATION ABOUT DEMAND

In relation to that, although having the maximin objective, the Maximin Criterion is relatively conservative as its focus is only on the worst case. On the other hand, the objective of the Minimax Regret Criterion is to balance the regret in between...