Operation Management

1.1 Introduction

Inventory management is the direction and control of activities with the purpose of getting the right inventory in the right place at the right time in the right quantity in the right form at the right cost. It determines when to order products, how much to order, identify source of supply in each stocking location. Inventory management includes all activities of forecasting and replenishment.

Since inventory is an important element in operation, activities controlling the level of inventory generally would affect significantly to a company. Thus, Inventory are held in order to manage and hide from the customer the fact that manufacture/supply delay is longer than delivery delay, and also to ease the effect of imperfections in the manufacturing process that lower production efficiencies if production capacity stands idle for lack of materials. (www.wikipedia.com/inventorymanagement)

The various activities listed are used to control inventory and planned for replenishment. They are process pooling, Kanban, classical Economic order quantity, part-delivery part production order quantity model, backorder model and quantity discount model.

On top of the various replenishment policies, the counting systems for inventory are periodic system, perpetual system and the 2 bin storage system. The counting system helps to maintain and estimate the remaining actual number of stock left in the physical warehouse excluding the factor of emergency, loss and spoilage due to wear and tear.

In order to be able to