Key Concepts related to the chapter
Students should be able to structure the information given in the case in terms of the
inventory types and how they are affected by Crayola’s inventory strategies. Based on the
information provided, the students should first identify the inventory size requirements for
Crayola. This is also related to answering the first discussion question. Small inventory
should be justified by the cost of capital, storage and handling costs, and taxes, insurance, and
shrinkage possibilities. On the other hand, a larger inventory will be needed to justify higher
customer service, lower ordering and setup costs, better labor and equipment utilization,
lower transportation cost, and lower payments to suppliers from quantity discounts.
The next point to consider is how inventories are classified in the case. Managers used the
terms raw materials, WIP, and finished goods. These are inventory categories for accounting
purposes. Students should be able to identify additional types of inventories based on the
information provided in the case. This task is related to the third question for discussion.
Another point is relating Crayola’s inventory strategy and its impact on the four operational
inventories - cycle, safety, pipeline, and anticipation. One way to think of it is to explain how
each supply chain decision reduces one of the four inventory types. An example is having
close proximity to suppliers so that it may reduce the amount of pipeline inventory.