![]() Additionally, EOQ also includes the setup and holding costs of an organization's inventory. It is also associated with batch order in terms of reducing total inventory costs by assuming constant consumer demands as well. This type of inventory management procedure is mainly applied to calculate unit numbers of a business that should be added to its inventory. Moreover, it will also be responsible for declining the competitive advantage of a company across the markets. Therefore, it will damage the reputation of that organization as it will be unable to meet consumer demand spikes. In this term, it can be explained that if unexpectedly demand increases, then the manufacturer may not be able to fulfill that properly due to limited inventory. On the other hand, to some extent, JIT is considered risky. JIT also helps in reducing insurance and storage costs along with liquidating costs or excess inventory discarding efficiently. This method of inventory management permits organizations for reducing waste and saving money by keeping records of inventory that is required for selling as well as producing products. In this context, a lower DSI indicates a shortened inventory clear-off duration, whereas the average DSI varies across different industries. Moreover, the figure of liquid inventory represents what the stock of a company could stay for how many days. The prime feature of the DSI procedure is to indicate liquid inventory management. Additionally, it is also known as average age of inventory, inventory outstanding and also days in inventory (DII). DSI mainly indicates the average time in a day that an organization takes to turn its inventory into sales including goods and work progress. Besides this, the inability for presenting accurate inventory plans and forecast sales has benefited from the application of the MRP procedure. Along with this, it is also useful for ensuring the communication regarding material supply on time. In this term, it mainly focuses on monitoring accurate sales records of manufacturing products to enable appropriate inventory needs of the business. This inventory management procedure is considered as sales-forecast dependent. Some of the procedures are materials requirement planning (MRP), just-in-time (JIT) manufacturing, day sales of inventory (DSI) and economic order quantity (EOQ). Types of inventory management?īased on the type of products or businesses there are some inventory management procedures. The inventory of a company is considered one of the most important assets in all industries such as food services, manufacturing, retail and others. Besides this, inventory management practices try to streamline inventories from raw components to finished products efficiently. It includes the management of components, raw materials, finished products and warehouse processing products. The concept of inventory management mainly represents the procedure of storing, using, ordering and selling a business's inventory. ![]()
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