Question

Due Friday

Respond to the following in a minimum of 100 words:

What are some methods of controlling inventory? Discuss controlling the various types of inventory such as finished goods, raw material and work in process.

Answer 1

Some Inventory control methods:

1.Economic order quantity

Economic order quantity, or EOQ, is a formula for the ideal order quantity a company needs to purchase for its inventory

2.Re order level

The reorder point formula is an inventory management technique that’s based on a business’s own purchase and sales cycles that varies on a per-product basis. A reorder point is usually higher than a safety stock number to factor in lead time.

3.ABC analysis

This inventory categorization technique splits subjects into three categories to identify items that have a heavy impact on overall inventory cost.

• Category A serves as your most valuable products that contribute the most to overall profit.
• Category B is the products that fall somewhere in between the most and least valuable.
• Category C is for the small transactions that are vital for overall profit but don’t matter much individually to the company altogether

4. Just In Time Inventory

Just-in-time (JIT) inventory management is a technique that arranges raw material orders from suppliers in direct connection with production schedules.

JIT is a great way to reduce inventory costs. Companies receive inventory on an as-needed basis instead of ordering too much and risking dead stock. Dead stock is inventory that was never sold or used by customers before being removed from sale status.

5.Drop shipping

Dropshipping is an inventory management fulfillment method in which a store doesn’t actually keep the products it sells in stock. When a store makes a sale, instead of picking it from their own inventory, they purchase the item from a third party and have it shipped to the consumer. The seller never sees our touches the product itself

Raw materials can be controlled by minimizing the defective materials received by us by acquiring good quality materials and quality check before they enter the production process.

Finished goods can be controlled by applying pareto analysis and ABC method

Work in progress shall be controlled by using demand forecasting and producing products when there is a demand i.e pull system of manufacturing.