Finally, the conclusion and analysis of all sections is given.
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2. Inventory Management.
Inventory is a key concern for any manufacturing or merchandising company. .
How they track, cost, and set up their inventory management system can be crucial to their success in their respective industries and financial stability. Inventory often constitutes more than 50% of total costs in manufacturing companies and over 70% of total costs in merchandising companies (Horngren, Foster, and Datar, 2000, p.712). When dealing with this magnitude of investment, management must delegate a great deal of effort and concern to the planning and control of inventory accounts, in order to account for them in the manner that provides the greatest benefits for the company. Inventory management is essential in all organizations, because every organization has some form of inventory. Inventories in manufacturing and merchandising companies are usually obvious, however service organizations such as restaurants and hospitals also have important inventories. .
A wide range of variables and methods exist when considering which inventory management strategy to implement. Costs are usually the key focus in inventory-related decisions. These costs include those involving purchasing, ordering, carrying, stockout, and quality. Various inventory models apply to unique situations, however the most commonly used models are economic order quantity (EOQ), production order quantity (POD), and quantity discount. Once a company decides on their inventory system, purchasing is a subsequent area of concern for inventory management. Whichever strategy a company decides to deploy, their overall objective is always to minimize costs.
2.1 Costs of inventory.
As discussed earlier, costs are an important consideration when accounting for inventory. Operations management provides many tools for determining these costs and the variables included in their calculation.
