Defining Inventory Policies for your ABC Product Groups-A Cheat Sheet

A crucial first step before you embark on your inventory optimization journey is to define your inventory policy. Typically, an organization will have a gamut of product lines and already defined product groups, based on certain characteristics of these product lines (most common is the ABC classification for Inventory Management purposes). Since the purpose of creating those product groups is to manage your Inventory for each group differently, it is important to analyze which Inventory Policy is appropriate for which product group.

The Overview below assumes that you are familiar with different Policies like (s,Q), (s,S), (R,S) and (R,s,S). If you want to refresh your memory on these policies, please refer to my post on “A Summary of commonly used Inventory Policies” for brief explanations on what these policies are. The overview below also provides a high level overview of the characteristics of items in each of the product groups but if you are looking for some more details, please refer to my post on ABC Classification (Overview of ABC Classification for Inventory Management).

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