Write a 8 page essay on Methods of Inventory Management.Download file to see previous pages... The ABC analysis groups inventory into three classes. Class A, B and C contain 80, 15 and 5 percent of th

Write a 8 page essay on Methods of Inventory Management.

The ABC analysis groups inventory into three classes. Class A, B and C contain 80, 15 and 5 percent of the total value of the inventory respectively (Bowersox &amp. Cooper 1992). The ABC analysis gives a simple and quick review of the inventory. The ABC analysis also gives a clear view and meaning of the whole assortment of products in the inventory, thereby making it an efficient method to control inventory investment. The ABC analysis makes it easy for an inventory manager to devote resources to only those places where it will have the biggest positive feedback. Nike, Inc is an American manufacturer of shoes. In their ABC analysis, leather forms class A, sole forms class B while shoe lace forms class C (Cousins &amp. Spekman 2003). ABC analysis is a vital method for management of inventory.

EOQ is a technique for inventory management that minimizes ordering and holding costs for the year. EOQ is a crucial accounting formula that determines when the combination of inventory carrying a cost, order, and costs are the least (Simchi et al. 2003). The result obtained from the formula gives the most effective quality to order. There are two models used in EOQ: Q and P models. In the Q model, whenever the stock on hand reaches the recorder point, a fixed quantity of materials is ordered. Advantages of the Q model are that the inventory materials are at the most economical quantity and inventory control personnel automatically devote attention to stocking the only items that are needed when they are needed. A major disadvantage of the Q model is that the suppliers may be inconvenienced by orders that are raised at irregular intervals. In the P model, the stock position of every item in the inventory is closely monitored. Advantages of the P model are that the inventory and ordering costs are low and the model can be used on materials that are used irregularly or in seasons.&nbsp.