Inventory analysis

Inventory analysis is one of the branches of Operation Research which deals in studying and understanding the stock/product mix combined with the knowledge of the demand for stock/product.^[1] It is the technique to determine the optimum level of inventory for a firm.^[2][3]

Methods and applications

Inventory analysis is widely used to classify and manage stock items according to their demand patterns and strategic importance within a firm’s operations. Modern analytical approaches combine traditional inventory control with techniques such as ABC–XYZ classification and safety-stock modelling to determine optimal stock levels and reduce the likelihood of shortages. These methods enable firms to identify high-value items with stable demand, distinguish them from low-value or highly variable-demand items, and allocate resources more efficiently.^[4]

Computing inventory balances

• Average-cost method
• First in first out
• Last in first out