Inventory well based on the information presented

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Reference no: EM132295552

Parts-Are-Us is an auto parts supplier launched in 2013. Annual sales have increased by a factor of 10 over the last 5 years. After reviewing inventory levels, the president of the company finds that system wide inventories have increased by a factor of 5 over that period. The president views this as a signal that the company has been managing its inventories well. Assume that the company uses an Economic Order Quantity model to place orders and has no lead time or safety stock. Also assume that the setup cost and holding cost have not changed over this period – in other words, all that has changed is demand.

Do you agree with the company president’s view that the firm is managing its inventory well based on the information presented? Why, can you show the work?

Reference no: EM132295552

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