Just Baked Inventory Management

by: Eric Svaan

Publication Date: January 25, 2013
Length: 10 pages
Product ID#: 1-429-318

Core Disciplines: Operations Management/Supply Chain

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Teaching Note

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What’s better than a Just Baked cupcake? Nothing really, especially when inventory decisions about the cupcakes are also so good that customers are satisfied, stores are profitable, and the company grows. This classroom exercise leads students through stepwise computations applying proven inventory management rules to make retail store stocking and material purchasing decisions effectively. Hints are provided to assure success in learning and applying the concepts laid out in WDI Publishing’s Note on Managing Inventories (1-429-246), also by Eric Svaan.

Teaching Objectives

After reading and discussing the material, students should:

  • Identify tradeoffs faced by retailers who must decide on stock levels for perishable inventory.
  • Extract cost and pricing data values from narrative text and translate those into inventory parameters to be used in calculations to support effective inventory management.
  • Apply the Newsvendor Model for inventory management to calculate target Service Levels and profit-maximizing inventory ordering policies for a SME, and understand how it would be applied to any business.
  • Recognize the difference between Periodic Review and Continuous Review inventory systems, and compute accurately the inventory management parameters in each system type.