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KNOWLEDGE LIBRARY

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27Jun

Warehouse Occupancy Percentage

Optimal storage utilization helps enforce healthy inventory management. In our early work with Honda their...

02Jun

Efficient Procurement Inventory

Efficient procurement inventory (EPI) is often required to realize steep discounts when a special opportunity...

02Jun

Inventory Carrying Rate

The inventory carrying rate (ICR) is the percent of the unit inventory value used to...

26Jun

Inventory Activity Profiling & Data Mining

Suppose you were sick and went to the doctor for a diagnosis and prescription.  When...

27Jun

Inventory Performance Measures

Inventory performance measures include financial, productivity , quality, and response time indicators for evaluating the efficiency and...

Order Quantity Profile

Many people argue that EOQ analysis is outdated.  I argue that despite its deficiencies, an EOQ analysis should be completed as a part of any inventory strategy.  First, the analysis suggests appropriate reordering intervals for all items.  (The forecast annual demand divided by the EOQ is the optimal time between orders.)  Second, the analysis points out the importance of reducing the costs of placing purchase orders.  The lower the purchase order cost, the more economical it becomes to order in small increments and the less inventory we will have in the system.  Third, the analysis comparing actual order or run quantities with the optimal order/run quantities often reveals significant opportunities to reduce lot size inventory levels. In the example from a biotechnology manufacturer and distributor the order/run quantities are 2 to 8 times what they should be for over 1/3 of SKUs.

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