"Sorry, we're out of that item." How often have you heard that during shopping trips? In
many of these cases, what you have encountered are stores that aren't doing a very good
job of managing their inventories (stocks of goods being held for future use or sale). They
aren't placing orders to replenish inventories soon enough to avoid shortages. These stores
could benefit from the kinds of techniques of scientific inventory management that are
described in this chapter.
It isn't just retail stores that must manage inventories. In fact, inventories pervade
the business world. Maintaining inventories is necessary for any company dealing with
physical products, including manufacturers, wholesalers, and retailers. For example,
manufacturers need inventories of the materials required to make their products. They
also need inventories of the finished products awaiting shipment. Similarly, both whole-
salers and retailers need to maintain inventories of goods to be available for purchase
The total value of all inventory--including finished goods, partially finished goods,
and raw materials--in the United States is more than a trillion dollars. This is more than
$4,000 each for every man, woman, and child in the country.
The costs associated with storing ("carrying") inventory are also very large, perhaps