Inventory Management in a Manufacturing Environment

       Inventory models for optimizing order quantity have been applied far before the computer age reared its head. Long before the term, “Economic Order Quantity” was used, many in the manufacturing and storage industry referred to this term as, “Minimum Cost Quantity”. The accountants of years past calculated EOQ, one painstaking item at a time. Although this process was long and tedious, it proved that manufacturers recognized and respected the importance of approaching inventory decisions with a scientific approach.

      Fast-forward to today's technologically advanced industry and you may be surprised to learn that many of these inventory control systems are responsible for poor results because of inaccurate data entered. Many software packages designed to calculate EOQ do so automatically. Often, those using these programs do not understand the calculations involved, and therefore, do not understand the data input and system setup which controls the output. This can result in a misconception that assumes the purchase clerks are ordering based upon the system requirements. This has also manifested itself in many companies finding themselves achieving high goals in inventory increases but a bottom line that has shrunk because of increased operational costs.

      What is the solution to this crisis in inventory control and manipulation? Perhaps it would be best if manufacturers and inventory control specialists took a page out of the history books of years past. While it will never be productive to go back to the days of calculating order quantity, one item at a time, it is imperative that those responsible for ordering and inventory control think “outside the box” and do not rely entirely on a software package that lacks individuality and control. Only when this individualized and unique approach is utilized, will control of inventory be in the hands of those who are responsible for it.