Cycle inventory: it is also known as base stock. It can be defined as the % of the inventory that results from the replenishment process. Cycle inventory can also be said to result when in order to reduce unit purchase costs (or increase production efficiency), the number of units purchased (or produced) inventory from to which the lot size is applied. It may be more economical to order the product in a large size than to order it in small batches. At the beginning of a performance cycle, the stock level is at the maximum level. However daily customer demands stock to be withdrawn from the inventory until it reaches zero. Prior to this, a replenishment order must be given. The amount ordered for replenishment is called the order quantity. The average inventory held as a result of the order process is referred to as base stock, which is also called as the lot size stock. Usually the base stock equals to one half of the order quantity.



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