# What Does Criticalness for Inventory in a Supermarket Mean?

Criticalness in the context of supermarket inventory refers to the relative importance of an inventory item. Supermarket managers need to balance limited resources with the cost of holding stock inventory and the marketing value of providing reasonable levels of customer service. To do this they require a method that keeps track of inventory and determines stocking and restocking policies based on how critical or important an item is to the business and its clients. This is determined by several factors, such as an item's shelf life, value to customers and profitability margins.

## Economic Order Quantity

One method of determining an inventory item's criticalness is to calculate its economic order quantity, or the ideal number of items you should keep in stock based on annual demand, order cost and the cost of keeping in stock. The formula for calculating the economic order quantity of an inventory item is (2DS/H)^1/2, where D is the item's annual demand, S is the ordering cost, H is the cost of keeping it in stock and ^1/2 is a mathematical notation for square root.

## Economic Production Quantity

A similar way of determining an item's criticalness in a supermarket's inventory is its economic production quantity. This measure uses the economic order quantity rate but also takes into account its delivery rate and use rate. The formula is EOD * (p/p-u)^1/2, where EOD is economic order quantity, * is a mathematical notation for multiplication, p is the delivery rate and u is the usage rate. This measure of criticalness is especially useful in supermarkets where stock ordering time is considerable.

## Interchangeable Products

An inventory's item criticalness may also be measured by the number of similar alternatives. This is especially important for items that are considered part of a community's staple diet. For instance, a supermarket running out of eggs or bread is more critical than being out organic crunchy peanut butter.

## ABC Inventory Control

The ABC inventory model control method assigns the criticalness of a stock keeping unit based on its sales volume and revenue. This system classifies units with a high volume of sales or high revenue returns as A, items with a medium-range volume of sales as B and items at the low end of the revenue spectrum with C, and keeps stock accordingly.

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Writer Bio

Andrew Latham has worked as a professional copywriter since 2005 and is the owner of LanguageVox, a Spanish and English language services provider. His work has been published in "Property News" and on the San Francisco Chronicle's website, SFGate. Latham holds a Bachelor of Science in English and a diploma in linguistics from Open University.