SCM 301 1st Edition Lecture 12Outline of Last Lecture I. IntroII. Types of planningIII. Aggregate PlanningIV. Strategies to meet demandOutline of Current Lecture I. Inventory - the stock of any item or resource used in an organization II. Categories of InventoriesIII. Two Functions of InventoryIV. Economic Order QuantityCurrent LectureCH 7V. Inventory - the stock of any item or resource used in an organization VI. Categories of Inventoriesa. Finished goods b. Raw materials c. Work-in-process (WIP) d. Maintenance, repair & operating (MRO) VII. Two Functions of Inventorya. Buffer uncertainty in the marketplaceb. Decouple dependencies in the supply chainVIII. Economic Order QuantityThese notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.a. Answers the question ‘How much do I order?’b. Used for independent demand items.c. Objective is to find order quantity (Q) that minimizes the total cost (TC) of managing inventory.d. Must be calculated separately for each SKU.e. Widely used and robust (i.e. works well in a lot of situations, even when its assumptions don’t hold exactly). f. Formula: Total annual inventory= annual purchase cost +annual order cost+ annual holding