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    How to choose the right Inventory Control System

    If you are reading this article it likely means that you already understand the basics of Inventory Management, purchased an inventory management system, and have things up and running. Now you are looking to get a grasp on how to understand different models of inventory forecasting and control that will help you lower your inventory levels without taking a hit to your level of service. If all of that is true; you are in the right place. This article is written from an academic standpoint and by learning these concepts it should help you apply them to your own inventory practices, or at the minimum understand what your inventory software is trying to do for you. In my inventory forecasting article I go over a single period inventory forecasting model called the newsvendor model which you can read here. The newsvendor (newsboy) model works for a very specific type of situation where you make a prediction of how much inventory to order before a pre-specified selling season. Typically this is not the case for most businesses wherein business is conducted continually over an indefinite period of time. That doesn’t mean that the newsvendor model doesn’t have a purpose, and in fact it can always be used as a simple gut check to see if you are in the right ballpark for a specific inventory item. Inventory Control Systems You have an operation and you are carrying inventory. Business is continuous and takes place over multiple periods of time. So we need a model to help us make decisions. There are two main systems used for setting inventory levels in this environment and they are: Reorder Point System Base Stock Inventory System Under the Reorder Point System we continuously monitor inventory status and whenever inventory drops below a predefined threshold we reorder...

    powerhouseFebruary 4, 2016
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