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Article Summary: Supply chain inventory management through EOQ

11 January 2023
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Article Summary: Supply chain inventory management through EOQ

Introduction

Effective supply chain inventory management is key to maintaining a healthy and efficient

business. Proper stock levels help prevent disruptions in production, reduce costs associated

with excess or shortage, and ensure timely delivery of goods to customers. In addition,

accurate inventory control can lead to increased profits through better pricing and improved

margin performance.

EOQ provides an automated way for businesses to manage their inventories by specifying the

amount of each product that should be produced at any given time based on ordered

quantities from suppliers. EOQ helps you keep track of your overall supply base while

ensuring that products are produced only when they're actually needed - minimizing

wastefulness and increasing efficiency across the entire supply chain.

However, tracking all aspects of your inventory (from raw materials down to finished

products) is not a simple task. And trying to do so manually is often difficult and time-

consuming. That's where Economic order quantity (EOQ) comes in handy!

Purpose of the article

The purpose of this article is to offer Supply Chain Inventory Management through

Economic Order Quantity (EOQ) techniques. EOQ is a method that can be used in order to

improve the flow and accuracy of inventory levels within a supply chain. By understanding

how EOQ works, businesses can more effectively manage their stocks, minimize waste, and

increase efficiency.

There are many purposes for Economic order quantity (EOQ) in a supply chain. EOQ is used

to control inventory, optimize delivery times, and minimize costs.

When implementing an EOQ policy, it's important to consider the following factors:
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-What products or services are you trying to allocate resources to?

-How Often Do You Need This Item?

-How Long Will It Take To Obtain This Item If Order Is Placed Now?

-What Are The Possible Costs Related To Not Having Enough Of This Item?

Once you have determined these factors, you can begin developing your EOQ plan. There are

several tools available that can help with this process, including visual management systems

(VMSs), linear programming models , and point of purchase displays . By using these tools

together, you will be able to create a smooth and efficient supply chain that meets your

needs!

What are important things that are learned from the review

By using EOQ, you can avoid overproduction and excess inventory costs. Plus, by being

proactive about managing your inventories, you will help keep your business running

smoothly during times of peak demand or shortages. Implementing EOQ can help improve

both short-term profits and long-term sustainability; so don't wait - start measuring today!

Inventory management is one key element of SCM that can help businesses overcome these

challenges. Inventory-focused SCM helps businesses prioritize inventory according to its

strategic value rather than its operational status or market demand. This approach allows

companies to reduce stock levels whenever there is sufficient capacity available, which leads

to improved efficiency and financial performance.

Issues with insufficient or obsolete stock often lead to delays in product shipments, missed

deadlines, and costly recalls. By using SCIM practices such as strategic purchasing, proactive

ordering flows, managed stocks levels via reorder points/constraints optimization (ROPO),

strategically placed holding yards/cache facilities etc., manufacturers can significantly reduce

these costs while still meeting customer demand.

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What is the impact of the article on your opinions before reading the article?

After reading the article on Supply chain inventory management through Economic order

quantity, it seems that there is a lot of benefits to implementing this type of system. First and

foremost, EOQ can help alleviate some of the pressure that is often felt when trying to meet

tight deadlines. This is because it allows for greater flexibility in how products are produced,

minimizing wasted resources and ensuring that supplies are always available when they're

needed.

A well-oiled supply chain requires accurate and timely inventory management. In order to

ensure that your items are available when you need them and in the right quantities, it's

important to use Economic Order Quantity (EOQ). EOQ is a planning tool used to determine

how much of an item or product should be produced at any given time. It takes into account

variables such as leadtime, throughputs,and scrap rates and determines the optimum number

of units needed to fulfill customer orders while minimizing waste.

EOQ also helps improve quality control by ensuring that all components are delivered on

time and in the correct condition. This not only ensures customer satisfaction (and keeps

them coming back!), but also reduces costs associated with recalls or product failures. In

addition, it can reduce workplace stress levels thanks to better communication between team

members - everyone knows what's expected of them and there's less chance for confusion or

conflict.

Conclusion

EOQ proposes that the best way to control inventory levels is through ordering quantities that

are consistent with market demand. This allows businesses to maximize profits while

fulfilling customer orders without overstock or excess inventory carrying costs 。 The key
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concept behind EOQ is "division of labor." This means that workers should be assigned

specific tasks so they can focus on completing only one task at a time. By doing this, it will

prevent bottlenecks from forming and production will move smoothly throughout the entire

supply chain.

This article discusses how EOQ can be applied in various areas of business including

manufacturing, purchasing/sourcing, distribution/logistics etc.

References

Riza, M., Purba, H. H., & Mukhlisin. (2018). The implementation of economic order quantity

for reducing inventory cost. Research in Logistics & Production , 207-216.