Assignment: 

1. What are the most common inventory management and control models?  

- There are three (3) popular inventory control models are Economic Order Quantity (EOQ),
Inventory Production Quantity, and ABC Analysis.

1) Economic Order Quantity (EOQ)

 One of the oldest and most popular inventory management method. based on
your company holding costs, ordering costs, and rate of demand. EOQ tells how
many inventory units should order to save money.

FORMULA:
√ 2 SD
Production Cost
S= Setup (Order) Cost
D = Demand Rate (units)

However, the EOQ has a major assumption that will never be work to every
business. It assumes that the rate of demand, ordering costs, and unit price of
inventory is constant. So, if they have periods where demand for the items is
significantly lower or higher than other periods, the value of EOQ will be
worthless.

2) Inventory Production Quantity

 This inventory control approach, also known as Economic Production Quantity, or

EPQ, advises you how many products your company should order in a single
batch in order to save money on holding and setup costs. It's assumed that your
supplier delivers each order to your company in pieces rather than as a whole.

The EOQ model is expanded in this model. The EOQ model implies that suppliers
deliver inventory in whole to your customer or business, whereas the EOQ model
assumes that suppliers send inventory in part to your customer or business.

FORMULA:
√2 K D
h(1−x )
K = Setup (Order) Cost
D = Demand Rate (units)
H = Yearly Holding Cost Per Product
P = Yearly Production Rate
D = Yearly Demand Rate
X = Demand/Production Rate

This model could be a good fit for your business if: If you're in the automobile
industry, you probably order inventory from suppliers in parts rather than in bulk.
 Product demand is steady over time.

3) ABC Analysis
 The more money you make from a certain inventory, the more valuable it is to you. ABC
analysis classifies your inventory into categories depending on its importance. Knowing
which inventory is the most significant allows you to concentrate your efforts. ABC
Analysis is typically used in conjunction with other inventory management systems, such
as the Just-in-Time method, to maximize its effectiveness.
Inventory is divided into three categories: A, B, or C. So, how do you decide which
category to assign inventory to? The Pareto Principle, widely known as the 80/20 rule, is
the foundation of this strategy.

THE PARETO PRINCIPLE

Category A: This category's inventory brings in the greatest money while accounting for a
modest portion of your entire inventory. This is the crown jewel in your collection. It only
accounts for 20% of your inventory but generates 70% of overall sales. Category A
inventory receives the most attention and is subject to strict ordering regulations.
Category B: this inventory is less critical to your business's survival than Category A
inventory, but it is still important. It's 30% of your shares for 25% of the revenue.
Category C: this inventory accounts for 50% of your total product volume and generates
5% of revenue. This inventory does not make as much money as A and B, but it is
reliable. Because it generates such a small amount of revenue, inventory management
are lax.

This model will work well for you if your firm provides services or goods that all have a
wide range of prices, such as a landscaping company.

Amazon is a fantastic illustration of this, as its products are available at a wide variety of
costs. Not all of the items on their website are available. This would result in extremely
high holding costs, making profit difficult to achieve. So instead of ordering inventory
based on what they see with their ABC category rules, they order inventory based on
what they see with their ABC category criteria.

The disadvantage of this inventory control approach is that it requires you to

appropriately categorize the correct inventory in order for it to work. Otherwise, you'll be
focusing all of your inventory management efforts on a product that isn't making you
money.

2. What is the economic order quantity (EOQ) in inventory management? 

- The economic order quantity (EOQ) is the order quantity that a corporation should use to
reduce the total expenses of ordering, receiving, and storing inventory. When demand,
ordering, and holding costs are all consistent across time, the EOQ formula is most useful.

3. Explain the concept and tools of inventory management.

- Inventory management aids businesses in determining which stocks to order and when to
order them. It keeps track of inventory from the time it is purchased until it is sold. The practice
tracks trends and reacts to them to guarantee that there is always adequate stock to satisfy
client orders and that shortages are detected early.