Improving Inventory Management in Power Generation Company Essay

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2.1.2.6 Inventory Control Model
The oldest inventory control model was introduced by Ford W Harris in 1915. The approach of this model is to build a model of an idealized inventory system and calculate the fixed order quantity that minimizes total costs. This optimal order size is called the economic order quantity (EOQ) (Waters, 2003). The EOQ model depends on four parameters, there is; demand is known and constant, holding cost is known and constant, order cost is known and constant and the unit cost is known and constant. So, based on the parameters can be shown that in EOQ approach the pattern is figured like a tooth. Figure 2.3 Economic Order Quantity
Source: Waters (2003

In addition, when the right time to order is commonly called
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2.1.2.6 Inventory Control Model
The oldest inventory control model was introduced by Ford W Harris in 1915. The approach of this model is to build a model of an idealized inventory system and calculate the fixed order quantity that minimizes total costs. This optimal order size is called the economic order quantity (EOQ) (Waters, 2003). The EOQ model depends on four parameters, there is; demand is known and constant, holding cost is known and constant, order cost is known and constant and the unit cost is known and constant. So, based on the parameters can be shown that in EOQ approach the pattern is figured like a tooth. Figure 2.3 Economic Order Quantity
Source: Waters (2003

In addition, when the right time to order is commonly called by recommended order point (ROP). ROP is working based on two parameters, average demand during lead time and safety stock. But, Lin (1980) which cited in Zong (2008) stated that safety stock is not necessary if the supplier is reliable and there is no seasonal demand.
In his studies, Slack (2007) stated that In many cases, the Economic Batch Quantity (EBQ) system, is useful for item which produced internally and intermittent. Other inventory control model known as Vendor Managed Inventory (VMI), is retailer-vendor relationship inventory model which the buyer allowed the vendor gives replenishment based on actual demand.
The other inventory control method is Just in Time. Abuhilal (2006) stated that there is a method to manage inventory
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