Cycle inventory exists because producing or purchasing in large lots allows a stage of the supply chain to exploit economies of scale and lower costs - through volume or lot-sized discounts. By definition, cycle inventory is the average inventory in a supply chain due to either production or purchases in lot sizes that are larger than those demanded by the customer.

1. Discuss Disney's management of cycle inventory. First of all, describe the product the company sells and the kind of inventory needed to produce this item. For example, McDonalds makes hamburgers, so what is the cycle inventory for ground beef? Estimate the companys ordering and holding costs. You will need to look at the companys annual report to determine the WACC. Discuss obsolescence cost, handling cost, occupancy cost, buyer time, transportation costs, receiving costs, and any other costs.
2. Show what the Economic Order Quantity would be for the item you discuss. Estimate to the best of your ability what D, S, C, and h would be explain why you use these numbers based on your discussion above.

Safety inventory helps a supply chain provide customers with high product availability and responsiveness to account for swings in demand and/or supply. Safety stock is created when a company either orders before an order is needed or orders more than the expected demand. Managing the level of safety inventory is a key component of a company's financial stability.

1. Think of a company that must be very responsive to consumers - never runs out of inventory. This company could be a service provider or one that manufactures and sells products. Discuss how this company manages its safety inventory.