Inventory is defined as any stored resource that is used to satisfy a current or future need (Render, Stair & Hanna, 2012). Many things come to make up inventory a few examples of what make up inventory are finished goods, raw materials, and work-in-progress. When it comes to a company’s most important and often times most expensive assets you discover inventory makes up as much as 50% of a company’s total invested capital (Render, Stair & Hanna, 2012). This paper will take a look at the importance of inventory control and some inventory control models and the importance they play in the success and or failure of a company. Inventory is important in the day to day operations of every major business and many non business …show more content…
Even though there are millions of products in our society “there are only two fundamental decisions that have you have to make when controlling inventory: How much to order and when to order” (Render, Stair & Hanna, 2012). There are several different types of modeling techniques used in day to day operations of companies. When taking a look at inventory control models there are objectives that need to be addressed “A major objective of all inventory models is to minimize inventory costs” (Render, Stair & Hanna, 2012). There are four areas that are significant when it comes to inventory costs: the cost of ordering, the cost of carrying or holding, the cost of stockout and the costs of the items. In the text we used for this class we learned a vast amount about the Economic Order Quantity (EOQ). “ EOQ is one the oldest and most commonly known inventory control techniques. Research on its use dates back to a 1915 publication by Ford W. Harris. This technique is still used by a large number of organizations today.” (Render, Stair & Hanna, 2012). To use the EOQ there are few assumptions that are made. “Demand is known and constant. Lead time is known and constant. Receipt of inventory is instantaneous. Quantity discounts are not possible. The only variable costs: set-up or placing an order, and holding or storing inventory over time.
To be successful in today’s business environment, an organization must be able to perform certain fundamentals accurately and efficiently. One of these elements is having an effective and efficient Inventory System Management (ISM). ISM enables one to have the knowledge of where his or her inventory is at every step of the way. This allows one to better interact with consumer and make sales. Choosing the right ISM can lead and pave the ground work for future business success and profitability.
We prefer the EOQ/ ROP system as gains from reducing the order/ production size (gains in terms of less value of inventory being produced) which though lead to increase in setup cost far outweigh the gains from Blanchard’s current system (gains in terms of reduction of setup cost) while, costs are that of the value of inventory being produced.
There are three types of inventory models primarily used by organizations, these include the economic order quantity model (EOC), production
EOQ as described everywhere is “the order quantity that minimizes total inventory holding costs and ordering costs. It is one of the oldest classical production scheduling models”. This model uses the following assumptions:
My inventory control procedures provided both increased revenues and cost savings. Quite simply, I ordered adequate levels of products which were in high demand, I was able to better meet customers’ needs, and my revenues increased. The cost savings I experienced as a result of my inventory control procedures were a bit more complex. First, in establishing a routine schedule for ordering, I was able to reap the benefits of lower shipping costs. Because I had a routine schedule, I could
Independent: the demand for the item is independent for the demand for any other item in inventory (EOQ)
Second, the classification in inventory management is still inaccurate. That results in some problems such as: the severe lack of some products which are in growing demand (1 inch valve series 230), the redundancy making storage expenses go up and the stagnancy in storage area (to products like gear driven rotary and monitor controller)
I have taken it upon myself to test two inventory management systems and have found a system that will yield the least cost to Parts Emporium Inc. The two systems I have tested are the Continuous Inventory System and the Periodic Inventory System. Using data that I have gathered from the products DB032 and the EG151, I have compiled calculations and have concluded a continuous inventory system would be best for our corporation. Attached you will find said calculations; I would like to take this moment and present the continuous inventory system and recognize all of the relevant costs. The following is an explanation of each calculation under the continuous inventory system:
1) EOQ/ROP system is essentially a reactive approach; this approach gives only an order quantity, it does not suggest ways to reduce the inventory.
Nowadays, in an era that has advanced technology and a place in the world. Everything can be linked only at your fingertips in the times of rapidly developing with the sophisticated technology of today. Therefore, an inventory system is also not lagging behind in introducing a method of keeping an inventory data systematically and safely. The system plays a very important role in improving the competitiveness of a business. Usually, organizations today face too many challenges to achieve the cost, speed and reliability. Efficient inventory system really help in order to make sure the store’s performance and data record is always in good condition and secured from abusers. The system basically to ease the admin to manage the
Inventory management has two very different, but effective methods: Vendor managed inventory, and consignment inventory. A company may choose to utilize either of these two methods to manage inventory. If a company is able to manage inventory, they will be better able to work the company's capital to the fullest extent. The following paper will identify the differences between the two as well as identify what type of company is best suited for each method.
A common way of decreasing the amount of inventory a business holds on a daily basis is implementing a just-in-time inventory process. A Just-In-Time inventory system means that the business gets the materials for a product, as they are demanded. “The electronic data
Managing what's in a warehouse or on the shop floor can be extremely complex if you're looking for optimal cost and supply chain management capabilities( Needleman, 2017 ). Inventory estimation and control is directly impacted a company’s profitability.
Axsäter, 2006). In this area only large scale multi-national companies have set a number of
Walmart’s inventory management is one of the biggest contributors to the success of the company and integration of technology in promote an effective operational process (Comm and Mathaisel, 2008). The biggest problem of Walmart’s across the world is empty