OPM 502: Inventory Management

Inventory management is a core element of any company’s supply chain management activities. Yet, deciding on the right amount of inventory, in a given setting, is a challenging task. For many companies, inventory ties up a huge amount of capital. To set appropriate inventory levels, companies must trade off inventory costs and benefits. While inventory costs tend to be readily visible, measuring inventory benefits is more demanding, in general. Business analytics tools and techniques are of great value to master these challenges. This course introduces such approaches. It structures the analysis by distinguishing different inventory drivers. For each driver, it first highlights the underlying economic trade-offs and then introduces and analyses quantitative models that allow to optimize them. Core topics include demand forecasting, lot sizing, safety stocks, and seasonal inventory. The course also addresses the interplay between the sales and operations functions of a firm.

Learning outcomes
In this course, students will learn how inventory can be used to manage supply chain performance. They will be able to distinguish different inventory roles in different supply chain environments. Students will become acquainted with relevant business analytics techniques and will understand how to apply them to address inventory management tasks. In conclusion, the course enables students to analyze inventory systems quantitatively and to determine the right inventory levels to achieve given performance objectives. Students will also gain insights into the interdependencies between the sales and operations functions of a firm.

Necessary prerequisites

Recommended prerequisites
Basic knowledge in operations management (e.g. BSc course “OPM 301 Operations Management”), basic knowledge in mathematics (including Linear Programming), and in statistics (probability distributions).

Forms of teaching and learningContact hoursIndependent study time
Lecture2 SWS8 SWS
Exercise class2 SWS5 SWS
ECTS credits6
Graded yes
Form of assessmentWritten exam (90 min)
Restricted admissionno
Further information
Performing lecturer
Prof. Dr. Eunji Lee
Eunji Lee
Frequency of offeringFall semester
Duration of module 1 semester
Range of applicationM.Sc. MMM, M.Sc. WiPäd, M.Sc. VWL, M.Sc. Wirt. Inf., M.Sc. Wirt. Math., MAKUWI
Preliminary course work
Program-specific Competency GoalsCG 1
LiteratureRecommended (not obligatory):
  • Chopra, S., Supply Chain Management: Strategy, Planning, and Operation, 7th Global Edition, Pearson, 2019.
  • Silver, E., D. Pyke, D. Thomas, Inventory and Production Management in Supply Chains (4th ed.), Wiley, 2016.
Course outlineTentative outline (subject to change):
  • Introduction to inventory management
  • Demand forecasting
  • Managing seasonal stock
  • Managing cycle stock
  • Managing safety stock
  • Managing inventory portfolios
  • Inventory location choices