Describe any four types of inventory and the drivers that spur their need

Question

What will be an ideal response?c

Answer 1

Answer: Answers will vary depending on the types chosen. The inventory types discussed in the text are cycle stock, safety stock, anticipation inventory, hedge inventory, transportation inventory, and smoothing inventory.
Cycle stock is components or products that are received in bulk by a downstream partner, gradually used up, and then replenished again in bulk by the upstream partner. The driver for cycle stock is a mismatch between downstream partner's demand and most efficient production or shipment volumes for upstream partner.
Safety stock is extra inventory that companies hold to protect themselves against uncertainties in either demand or replenishment time. The safety stock driver is uncertainty in supply or demand.
Anticipation inventory is held in anticipation of customer demand and is driven by a mismatch between timing of customer demand and supply chain lead times.
Hedge inventory is a form of inventory buildup to buffer against some event that may not happen and is driven by uncertainty in supply or demand.
Transportation inventory is inventory that is moving from one link in the supply chain to another. This is driven by a mismatch between timing of customer demand and supply chain lead times.
Smoothing inventories are inventories used to smooth out differences between upstream production levels and downstream demand. Smoothing inventories are driven by a mismatch between downstream demand levels and upstream production capacity.