Supply$-$chain strategy decisions determine logistics activities.Managing inventory involves the identification of three relevant costs: holding $($carrying$)$ costs, ordering $($setup$)$ costs, and stockout costs. One strategy of demand forecasting will match to a production decision of make$-$to$-$stock $($MTS$)$ or make$-$to$-$order $($MTO$)$ production.This JIT $($Just$-$In$-$Time$)$ purchasing strategy will minimize holding costs of inventory and reduce or eliminate both storage costs and obsolescence costs but may increase ordering costs. The goal of the management team is to minimize the overall combination of costs associated with inventory management. Any inventory management model requires careful analysis to identify the holding costs, the ordering costs, and the stockout costs.The management team requires high$-$quality information in a database of the type found in Enterprise Resource Planning $($ERP$)$ systems.

These systems are demand$-$pull systems. Implementing a good demand$-$pull system requires a highly coordinated information flow that supports lean production. Lean production $($JIT$)$ can eliminate inventory and therefore, Just$-$in$-$Time $($JIT$)$ inventory management is appropriate. With no Work$-$in$-$Process $($WIP$)$ or materials inventories, the need for sequential or progressive accumulation of costs of production through the inventories is no longer necessary. Instead, two trigger points are identified. These include materials purchase and completion of quality finished goods. Costs transfer at only these two trigger points from the Direct Materials to the Finished Goods inventory.