Global
Procurement
Management
CHAPTER 6:
INVENTORY
MANAGEMENT
AND LEAD TIME
Lecturer: Duong Tran
Date: Mar 2026 1
CONTENTS:
Provisioning systems
Order quantities and stock control
Materials requirements planning
Manufacturing resource planning
Enterprise resource planning
Just-in-time
Lean and agile supply
Vendor-managed inventory
Covid-19: just-in-case inventory?
Time and competitive advantage
On-time delivery
Lead-time improvement
Effect of Covid-19 pandemic on supply chains
PROVISIONING SYSTEMS
Provisioning systems involve the These systems play a crucial role in Decisions regarding provisioning systems
policies and procedures that ensuring that the right materials are include the size of requirements,
organizations use to determine available at the right time to timing of orders, and the quantities
which items are kept in stock and support production and service to be ordered based on demand
the quantities that are stocked. operations. forecasts and inventory levels
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Order quantitiy
ORDER QUANTITIES Order quantities and stock control are essential components
AND STOCK CONTROL of inventory management that focus on regulating
manufacturing programs and material requirements.
Stock control
Effective stock control involves maintaining optimal
inventory levels to meet demand while minimizing holding
costs and stockouts.
Order decisions
Decisions related to order quantities and stock control
include determining the size of requirements, timing of
orders, and quantities to be ordered based on factors such
as lead times, demand variability, and economic order
quantity calculations
MATERIALS REQUIREMENTS PLANNING (MRP)
MRP
Materials Requirements Planning (MRP) is a system that
translates the master production schedule into net
requirements for components needed to implement the
schedule.
MRP
MRP helps in planning and scheduling production
activities by ensuring that the right materials are
available at the right time.
MRP
The system replans net requirements and coverage in
response to changes in the production schedule,
inventory status, or product composition
MANUFACTURING RESOURCE PLANNING (MRP2)
Manufacturing Resource Planning (MRP2)
expands on the concepts of MRP by
incorporating capacity planning, shop floor
control, and other manufacturing- related
functions.
MRP2 integrates production planning,
scheduling, and inventory management
to optimize manufacturing processes and
resource utilization.
This system helps organizations in
effectively managing their
manufacturing resources and
improving operational efficiency
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MRPI vs MRPII
Advantages of MRP I
• Reduction of the cost of inventories
• Control of inventory levels
• Reduction of waiting times in supply and
production
• Better manufacturing and purchasing
planning
• Knowledge about input needs
• Help in making supply decisions
• Control and documentation
Advantages of MRP II
• All the advantages coming from MRP I
• Optimization of machinery usage and
productivity improvement
• Coordination and control of production and
inventories
• Ease of adaptation to order changes.
• Reduction of outsourcing and idle times
• Financial knowledge of planned and real
production.
ENTERPRISE RESOURCE PLANNING (ERP)
Enterprise Resource Planning (ERP) is a
comprehensive software system that
integrates core business processes such
as finance, human resources, and supply
chain management.
ERP systems provide a unified platform for
data sharing, collaboration, and decision-
making across different departments and
functions.
By streamlining business operations and
data management, ERP systems help
organizations improve efficiency, productivity,
and decision-making
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JUST-IN-TIME (JIT)
Just-in-Time (JIT) is a production strategy
that aims to produce only what is needed,
when it is needed, and in the quantity
needed to meet customer demand.
JIT helps organizations reduce waste,
minimize inventory holding costs, and
improve operational efficiency by
eliminating excess inventory and
streamlining production processes.
By synchronizing production with demand, JIT
enables organizations to respond quickly to
changing customer needs and market
conditions, leading to improved quality and
cost savings
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JUST-IN-TIME (JIT)
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LEAN AND AGILE SUPPLY
Lean and Agile are supply chain
management strategies that
focus on enhancing efficiency,
flexibility, and responsiveness in
operations.
Lean principles aim to eliminate waste,
optimize processes, and continuously
improve operations to deliver value to
customers.
Agile supply chain practices emphasize
adaptability, quick response to market
changes, and collaboration with
suppliers and partners to meet customer
demands effectively
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LEAN AND AGILE SUPPLY
‘LEAGILE’ SUPPLY
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LEAN
AND
AGILE
SUPPLY
Demand and supply characteristics and lean and agile options
Lean and Agile Supply
Vendor-Managed Inventory
Vendor-Managed Inventory (VMI) is a
supply chain management practice
in which suppliers manage inventory
levels for their customers.
In VMI, suppliers monitor customer
inventory levels, replenish stock
automatically, and optimize inventory
levels to ensure product availability.
VMI helps improve supply chain
efficiency, reduce stockouts, and
enhance collaboration between
suppliers and customers, leading to cost
savings and improved service levels
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COVID-19: JUST-IN-CASE INVENTORY?
The Covid-19 pandemic has highlighted
the importance of supply chain resilience
and the need for organizations to
reevaluate their inventory management
strategies.
Just-in-Case Inventory refers to holding
safety stock or buffer inventory to mitigate
disruptions and uncertainties in the supply
chain.
Post-pandemic, organizations are
considering adopting just-in-case
inventory strategies to build resilience,
reduce supply chain risks, and ensure
continuity of operations in the face of
future disruptions 15
TIME AND COMPETITIVE ADVANTAGE
Time is a key variable in supply chain management
Minimizing time waste can reduce supply chain costs
Responsiveness and time compression are crucial for competitive
advantage
Companies that react promptly to customer needs attract more
orders
Importance of time to market and management
philosophies
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ON-TIME DELIVERY
Lead time stages from pre-order planning
to payment processing
Importance of analyzing and determining
the need to order
Different stages in production, warehouse,
and transit lead times
Supply lead time as the total of all
lead times excluding payment
lead times
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LEAD-TIME IMPROVEMENT
Reliable lead times are more
important than the length of
lead time
Methods for lead-time reduction:
agile supply chain, pre-built
inventory, or a combination
Sourcing with suppliers having short
'true' lead times is crucial
Importance of supply chain visibility
and controls for lead-time
improvement
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EFFECT OF COVID-19 PANDEMIC ON SUPPLY CHAINS
Procurement strategies post-Covid for building resilience in
supply chains
Increased flexibility, agility, and inventory levels in supply chains
Over 40% of European retailers planned onshoring to mitigate
disruptions
Focus on supplier vulnerability, risk exposure, and global
disruptions for supply chain management
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