Inventory Control is one of 10 important / strategic decisions in operations management. Inventories can be interpreted as a resource that has not been used. Inventories have economic value in the future when it is active. Inventory management functions include :
1. Inventory planning :
determine the material needs to fulfill the production plan has been prepared.
2. Inventory control :
determine the appropriate inventory levels, where reservations must be made again, safety stock, inventory and condition data collection rate.
Planning and inventory control that effectively, will give the exact needs of a good time, amount, and specifications with the optimal total inventory cost. The costs involved in determining the total cost of inventory :
purchase price per unit, if the item is obtained from the vendor or the cost of production per unit if the item is domestically produced.
2. Storage costs:
cost of area / space and facilities for the storage space, as well as handling facilities both physically and related data / information inventory.
3. Booking fee:
costs incurred due to raw material ordering process each procurement / purchase of raw materials. Booking fee covers the costs of preparation and laying of supply orders, the cost of handling and shipping of orders, the cost of inspection orders coming. If the item is produced is called the setup cost, include the cost of preparation of the machine. These costs are determined for all bookings.
One method of inventory control which can be used is a method of Economic Order Quantity (EOQ). EOQ is the most economical purchase for each purchase / reservation. The meaning is the most economical purchases / orders are accompanied with the lowest total cost. EOQ can be formulated as follows :
Inventory system should be calculated on the frequency of ordering in one period with the following formula :
The time between ordering can be calculated by the formula :
The amount of material in one period can be calculated by the formula :
D = (i-th product demand * the needs of raw material / unit) (4)
Reorder level can be calculated by the formula :
R = (L x D) + safety stock (5)
While the total inventory cost can be calculated by the formula :
Total Inventory Cost = Cost + order + Cost saving purchasing costs (6)
EOQ : the optimal number of bookings
A : The cost of a one-time booking
D : The amount of material in a period
h : The cost of storage
f : Frequency of ordering in one period
t : The time between ordering
R: Reorder level