Inventory Control Policy

As is the case in any type of system, there needs to be a reliable control policy for the operation of an inventory system.  The choice of the control system depends on the complexity of the operating scenario, the number of items that need to be controlled, the number of locations where inventory may be housed, and the availability of timely information to support the inventory control policy.  As we will see, simulation may be used to help choose the most effective inventory control policy.

We will consider here three types of inventory control policies:

• Distribution Inventory Control
•  Manufacturing Inventory Control
• Situational Inventory Control

Distribution Inventory Control

There are nine popular distribution inventory control policies organized into three categories –

• Manual Inventory Control

Two-Bin Systems (2BS)

Visual Review (VR)

• Basic Replenishment Schemes

Re-Order Point (ROP) with Economic Order Quantities (EOQ) – ROP/EOQ

Re-Order Point (ROP) with Order Up to Levels (OUL) – ROP/OUL

Review Time Period (RTP) with Order Up to Levels (OUL) – RTP/OUL

Review Time Period with Re-Order Points and Order-Up-To-Levels – RTP/ROP/OUL

• Advanced Control Policies

Joint Replenishment Programs (JRP)

Distribution Requirements Planning (DRP)

Continuous Replenishment Programs (CRP)

We will consider the operation, advantages, disadvantages, and proper applications for each control policy.

Situational Control Policies

C Items

Dead Stock

Manufacturing Inventory Control

Production Planning

MRP

Production Scheduling

Two-Bin System

Visual Inspection