Inventory Management

Inventory is an essential evil for the manufacturing industry because of the uncertainty in the production unit. The company has to carry inventory to avoid the condition in which the production has to stop because of the unavailability of raw material, on the other side sometimes it also happens that market demand of the product is not as per the forecasting.

When the market demand is as per Expectation Company, has to carry finished product inventory cost. To avoid both conditions or to minimize the impact of these conditions, managers design tools which are based on the calculation and these models known as inventory management models.

Managers always use these models for managing the inventory to manage the material requirements. Inventory management is necessary to reduce the cost of the manufacturing process by reducing the cost of holding raw material and finished product.

Most of the organization those are highly depending on the raw material and having less production cycle keep more material to avoid the problem at any contingency situations.

Inventory module is being developed to reduce the abundant of the raw material and these models have been developed in an organization on the basis of the demand of the raw material. Other than inventory models there are some other strategies which are in coordination with models and helps to reduce the inventory level in the store room.

All inventory models are the output of calculation of the past data and on the basis of past data, purchasing managers prepare a strategy for the next lot or season.


There are some important models are as following:

Economic Order Quantity models

It is one of the most important techniques for inventory utilization. This model based on the assumptions that the demand always remains constant. This model is most appropriate to measure the quantity of the raw material.

Lot for Lot Model

In this model purchasing manager order required raw material for a single lot and in the same way supplier entitled only to that lot. With this kind of strategy company only have to carry the cost of required material for a single lot and this also helps to reduce the inventory level in the store room.


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