Value-Based Inventory Management

TL;DR

This paper proposes a modified value-based inventory management model that aligns inventory decisions with the fundamental goal of maximizing firm value, rather than just book profits.

Contribution

It introduces a novel inventory management model specifically designed to enhance enterprise value, addressing limitations of existing profit-focused models.

Findings

The new model better aligns inventory decisions with firm value maximization.

It demonstrates improved financial outcomes compared to traditional models.

The approach integrates valuation principles into inventory management strategies.

Abstract

The basic financial purpose of a firm is to maximize its value. An inventory management system should also contribute to realization of this basic aim. Many current asset management models currently found in financial management literature were constructed with the assumption of book profit maximization as basic aim. However these models could lack what relates to another aim, i.e., maximization of enterprise value. This article presents a modified value-based inventory management model.