4.3 Types of inventory
Push and pull inventories are two of the main types. In this section, we will overview the various other types of inventory that are commonly discussed in logistics parlance.
Replenishment: This is inventory that is held for the normal process of meeting demand in normal conditions. This occurs when demand and lead times are accurately known. When this happens, no added level of stock needs to be held. Sometimes this inventory is called 'cycle stock'.
Pipeline: Described well in your text on page 374, this is stock that is in transit between one place and another. Cargo carried on ships is often pipeline or in-transit stock.
Safety: This is the inventory maintained when there is uncertainty, e.g., in lead time or demand or a combination of both. This inventory is sometimes called buffer stock. We have studied aspects of it in the previous section, when making calculations in the pull system.
Speculative: This inventory is held as an asset to be benefited from later. Examples include bulk buying and receiving rebates or holding stock to cover expected shortages of material or labour. Ships are sometimes known to carry cargo between countries that they have carried in the opposite direction earlier. This is also speculative holding and subsequent trading on the world market. Another form of speculative inventory is seasonal purchase of stock to be used or traded later in the year when availability is poorer.
Obsolete: This is stock for which demand no longer exists. This can be true for the whole company or for just one holding location. If it is for just one location, this stock is usually transferred to where it can be used.
Activity
In the space below, list the key differences and functions served by each of the inventory types described above.
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