Take the square root of (2SD) / Production Costīut the EOQ makes some big assumptions that won’t work for every company. EOQ lets you know the number of inventory units you should order to reduce costs based on your company holding costs, ordering costs, and rate of demand. The Economic Order Quantity inventory management method is one of the oldest and most popular. Which one you decide to use depends on your business. Three of the most popular inventory control models are Economic Order Quantity (EOQ), Inventory Production Quantity, and ABC Analysis.Įach inventory model has a different approach to help you know how much inventory you should have in stock. Related article: A Guide to Visual Inventory Control What are the three most common inventory control models? So how do you figure out your ideal inventory number? By using an inventory control model. Once you know these details, you can reduce operational expenses, lower storage costs, and save your business money. Inventory control helps your business maintain the right amount of inventory while reducing costs.Īccurate inventory control provides important information about your business that you don’t want to “ballpark.” You can find out which products are selling and which ones aren’t, which items you need to have in stock, and specifically how much is needed. Good inventory control means keeping the “just right” balance of inventory you want to make sure you have enough inventory in stock so that you can keep customers happy, but you don’t want to waste money ordering inventory that might not sell. Inventory control is the practice of maintaining enough inventory and assets to keep your business running smoothly. In this article, you’ll learn what some of the most common inventory controls are to use in inventory management so that you can start cutting costs and saving money. So how do you know how much inventory to order? That’s where inventory control models come into play. Ordering too much can really cost you, whereas not having enough loses you money and customers. Ordering the correct amount of inventory can feel overwhelming.
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