Inventory planning principles, costs, classifications, lot sizing, safety stock, ordering systems, cycle counting, and inventory performance metrics.
This module is one of the most heavily weighted areas on the CPIM exam. It covers inventory planning fundamentals, types and functions of inventory, inventory costs (carrying, ordering, shortage), valuation methods, ABC classification, lot sizing techniques (EOQ, POQ, lot-for-lot), safety stock calculations and service levels, reorder point and periodic review systems, inventory accuracy through cycle counting, and performance metrics such as inventory turns and days of supply. Mastery of inventory management is central to the CPIM credential. (~14% of exam)
5 minutes
5 Questions
Plan and Manage Inventory is a critical component of the Certified in Planning and Inventory Management (CPIM) framework, focusing on the strategic and operational aspects of maintaining optimal inventory levels to meet customer demand while minimizing costs.
At its core, inventory planning involves determining what to stock, how much to stock, and when to replenish. This process integrates demand forecasting, supply planning, and inventory control techniques to balance service levels against carrying costs, ordering costs, and shortage costs.
Key elements include understanding inventory types such as raw materials, work-in-process (WIP), finished goods, and maintenance, repair, and operations (MRO) supplies. Each category requires tailored management strategies based on its role in the supply chain.
Inventory management employs classification methods like ABC analysis, which categorizes items based on their value and consumption patterns. High-value A items receive tighter controls and frequent reviews, while lower-value C items are managed with simpler systems.
Replenishment strategies include fixed order quantity models (such as Economic Order Quantity or EOQ), fixed order period systems, and min-max approaches. Safety stock calculations account for variability in demand and lead times to buffer against uncertainty and maintain desired service levels.
Key performance metrics include inventory turnover, days of supply, fill rate, and stockout frequency. These indicators help organizations assess efficiency and identify improvement opportunities.
Modern inventory management also considers aggregate inventory strategies aligned with business objectives, including lean principles to reduce waste, just-in-time (JIT) approaches, and vendor-managed inventory (VMI) partnerships.
Effective inventory planning requires collaboration across departments including procurement, production, sales, and finance. It must account for lead time variability, supplier reliability, demand patterns (seasonal, trend, or intermittent), and storage constraints.
Ultimately, successful inventory management drives competitive advantage by ensuring product availability, reducing working capital requirements, improving cash flow, and enhancing overall supply chain responsiveness and efficiency.Plan and Manage Inventory is a critical component of the Certified in Planning and Inventory Management (CPIM) framework, focusing on the strategic and operational aspects of maintaining optimal inventory levels to meet customer demand while minimizing costs.
At its core, inventory planning involv…