√ Definition of Inventory Management, Purpose and Approach Model
Definition of Inventory Management, Purpose and Approach Model – In this discussion we will explain about Inventory Management. Which includes the meaning, purpose and model of the inventory management approach with a complete and easy-to-understand discussion. For more details, please see the review below carefully.
Definition of Inventory Management, Purpose and Approach Model
Let's discuss the meaning first carefully.
Definition of Inventory Management
Inventory management or in English Inventory Management is a part of operational management and production management. Inventory management can also be called an activity to maintain the optimum amount of goods owned.
From the above understanding, there is also a definition of inventory management put forward by experts, one of which is Martin and Pretty (1996:719), Inventory Management is the control of assets are used in the production process or produced to be solid in the normal course of the firms operations.
Which means that inventory management includes control of assets produced for sale on a normal scale of company operations.
Inventory Management Objectives
In general, company management has objectives, namely:
- Optimizing inventory of goods at minimal cost
- Providing certainty that there is inventory by means of safety stock
- Gives free time to manage production and purchasing
- Anticipate changes in demand and supply
- Eliminate or reduce the risk of late delivery of materials
- Make adjustments to the production schedule
- Eliminate or reduce the risk of price increases
- Maintain availability of seasonally produced ingredients
- Anticipate demand that can be enlivened
- Benefit from quantity discounts
- Make a commitment to customers.
D.T. Johns and H.A. Harding (2001:77) suggests the purpose of inventory management namely minimize investment in inventory while remaining consistent with the provision of service levels requested.
Meanwhile, according to Lukas Setia Atmaja (2003:405), the purpose of inventory management is to hold the supplies needed for sustainable operations at minimum costs.
Inventory Management Function
Herjanto in his book entitled "Management of Production and Operations" (2007:238), states that there is an inventory function in meeting company needs, namely:
- Eliminate the risk of late delivery of raw materials or goods needed by the company.
- Eliminate the risk if the ordered material is not good enough to cause it to be returned
- Eliminate the risk of rising prices of goods or inflation
- Storing raw materials produced seasonally makes it difficult for the company if the materials are not available in the market.
- Obtain profit from purchases according to quantity discounts
- Provide services to consumers with the items needed.
Inventory Management Approach Model
To carry out inventory management, three capital approaches must be carried out, namely economic order quantity, periodic review, and material requirement planning.
Economic Order Quantity (EOQ)
Economic order quantity is the number of orders that are very economical, namely the number of purchases of goods that can minimize the total cost of maintaining goods in the warehouse and the cost of ordering each year.
Periodic Review
In this approach, goods are ordered at the same time interval. This means that ordering goods has been scheduled regularly so that the prepared costs can be estimated.
Material Requirement Planning (MRP)
In MRP, the purchase of goods requires planning to make a product composed of several components or also known as an assembling system.
This aims to guarantee the existence of materials, items, components in production and also finished products. The goal of both is to keep inventory levels to a minimum, and also to plan delivery, scheduling and purchasing of materials.
Thus has been explained about Definition of Inventory Management, Purpose and Approach Model, hopefully can add to your insight and knowledge. Thank you for visiting and don't forget to read other articles.
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