Models of inventory management: the best option

Inventory management is a fairly important part of the policy of working capital management organization.This ensures a smooth process in the manufacture and sale of products at the lowest total costs.

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

Firstly, the system of basic conditions for the acquisition of stocks (volume batches, frequency of purchases, benefits and discounts).

Secondly, the possibility of alternative and sales.Important are the following factors: changes in sales, discounts in the cost, the possibility of supply, reliability and development of a network of dealers.

Thirdly, the terms of the production process.Attention should be paid to the duration of the preparatory as well as the main process technologies and production methods.

Fourth, the existence of costs of storage of stocks (the cost of warehousing services, unexpected freezing of funds)


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

model inventory control EOQ Wilson.It can be used to optimize the size of the exercise not only of inventory, but also reserves the finished product.Such management models will be able to help solve the problem, what is the scope of the company needs to acquire at the same time.The optimum size of the order is an amount of supply that is able to provide the required amount of reserves, while minimizing the totality of the costs of their acquisition and storage.But for such an effect it will need to make several important calculations.

Such management models imply that you need to divide the costs into two major groups:

  • resources that depend on the order of another batch of stocks (the cost should include the cost of transportation).They will depend on the volume of the party.
  • costs necessary for the storage of goods in a warehouse for a specific time.They will depend on the batch size.

for the correct application of inventory control EOQ model must be based on two basic rules:

  • To reduce the cost of the first group company is recommended to import materials, raw materials or goods for resale to the highest quantities.There is a clear pattern: the more volume of their size, the greater the opportunities to reduce the operating cost of ordering, delivering them to the storage and acceptance.
  • In order to reduce the cost of the second group, it is advisable to reduce the maximum number of games that are currently in stock.You can take advantage of the minimum level of storage, since a large amount of stocks will entail a high level of operational costs on storage.

But such management models have at their versatility and system deficiencies.We consider these in more detail.

Firstly, such a model can be used for one type of product, the amount of which must be measured continuously.

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

Third, the product is recommended to produce or procure the individual and small parties.

Fourth, the order must arrive separate delivery.

Fifth, flow reserve can not be interrupted.Is unacceptable situation, additional supplies.

Sixth, there should be discounts for large volumes of supply.