Inventory Planning Requires Collaboration between Operations and Accounting to Satisfy Marketing Demands

Abstract: Inventory is necessary in most businesses, especially in retailing and distribution. But who decides how much inventory is necessary or desirable? This decision can lead to a conflict among marketing, production and... [ view full abstract ]

Abstract: Inventory is necessary in most businesses, especially in retailing and distribution. But who decides how much inventory is necessary or desirable? This decision can lead to a conflict among marketing, production and accounting departments. Marketing wants enough inventory to satisfy demand plus a little extra in case of a windfall in sales. Production is more concerned with the rate of production although they do have to worry about where to store the inventory until it is used. Accounting has to worry about the cost of carrying inventory and the cash flow necessary to support the inventory.
In this paper, we will examine different situations that may confront inventory planners and how Operations and Accounting can work together to develop an inventory plan that satisfies demand at an acceptable cost, considering production capacity and financial constraints.