Models of inventory management: the best option

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2020-07-02 23:13:08

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The inventory Management is quite an important part of the policy of working capital management of the organization. This ensures smooth process in the production and sale of products at minimum aggregate cost.

For any enterprise is a negative fact is the presence of both deficit and excess inventory. Among the main factors that affect the process, the more significant the following:

First, the system of conditions for the acquisition of the basic inventory (volume of parties, the frequency of purchases, benefits and discounts).

Second, the opportunity and alternatives sales. Important are the following factors: changes in sales, discounts in cost, capabilities, demand, reliability, and development of a network of dealers.

Third, the conditions of the production process. Attention should be paid to the duration of the preparatory and the main process, technology and production methods.

Fourth, the presence of costs for the storage of inventory (cost of inventory maintenance, emergency freezing of funds).

To optimize these processes, the models of management. Consider the bulk of them in more detail.

Model of inventory management EOQ Wilson. It can be used in order to carry out optimization of the size not only of inventories but also of reserves of finished products. Such management model can help to solve the problem, what is the volume the company needs to purchase. The optimal order size is the number of deliveries that can provide the necessary amount of inventory while minimizing a set of costs for their acquisition and storage. But to achieve such effect you'll need to make several important calculations.

These management models imply that it is necessary the division of costs into two large groups:

  • Resources that depend on the ordering of the next batch of stocks (the price have included shipping charges). They will not depend on the size of the party.
  • The overhead required for storing goods in the warehouse during a particular time. They will depend on the size of the party.

For the correct application of the model of inventory management EOQ is necessary to rely on two basic rules:

  • To reduce the costs of the first group recommended the company to import materials, raw materials or goods for resale to the highest parties. There is an obvious pattern: the bigger the size, the more opportunities for reducing operational cost of placing orders, shipping them to the warehouse and acceptance.
  • In order to reduce costs of the second group, it is recommended to reduce the maximum number of batches that are currently in stock. It is possible to take advantage of the minimum level of storage, because the large size of the inventories will entail a high level of operating costs for storage.

But such models management with its versatility and have system deficiencies. Let's consider them in more detail.

First, a similar model can be applied to one kind of product, the amount of which shall be measured continuously.

Second, the level of demand must be known, independent and constant for a certain period of time.

Third, the product is recommended to make or buy a separate small batches.

Fourth, the order must come in a separate delivery.

Fifth, the distribution can not be interrupted. Unacceptable situation for additional supplies.

Sixthly, there should be discounts for large volume deliveries.


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ZH: https://tostpost.com/zh/business/45751-models-of-inventory-management-the-best-option.html






Alin Trodden - author of the article, editor
"Hi, I'm Alin Trodden. I write texts, read books, and look for impressions. And I'm not bad at telling you about it. I am always happy to participate in interesting projects."

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