Performance measures for returnable inventory: A case study

Abstract

This paper is concerned with developing relevant performance measures for an industrial gas manufacturer to monitor and control the deployment of the firm's cylinders, which represent a significant portion of the firm's investment. In particular, four interrelated performance measures that are relevant to returnable inventory are proposed and derived. They address questions such as how frequently the cylinders are being used, how long they are used each time, whether they are effectively utilized, and how much of safety stock to keep. The application and usefulness of the proposed measures are illustrated on one of the gas products of a major industrial gas manufacturer. These measures enable planners to predict the proper level of cylinders required in the future as well as taking corrective measures whenever appropriate.