Economic Order Quantity (EOQ) and Effective
Inventory Management
Overview
Economic
order quantity (EOQ) is the order quantity of inventory that minimizes the
total cost of inventory management.
Two
most important categories of inventory costs are ordering costs and carrying
costs. Ordering costs are costs that are incurred on obtaining additional
inventories. They include costs incurred on communicating the order,
transportation cost, etc. Carrying costs represent the costs incurred on
holding inventory in hand. They include the opportunity cost of money held up
in inventories, storage costs, spoilage costs, etc.
There
is also a cost for each unit held in storage, commonly known as holding cost,
sometimes expressed as a percentage of the purchase cost of the item.
We
want to determine the optimal number of units to order so that we minimize the
total cost associated with the purchase, delivery and storage of the product.
The
required parameters to the solution are the total demand for the year, the
purchase cost for each item, the fixed cost to place the order and the storage
cost for each item per year. Note that the number of times an order is placed
will also affect the total cost, though this number can be determined from the
other parameters.
Training
Outcomes
Upon
successful completion of this Training;
o
Attendees
will learn how the stores function affects and contributes to both the
profitability and efficiency of an organization and the importance of
controlling inventory.
o
Contemporary
methods and techniques for the efficient storage of inventory are explained
along with emphasis on practical issues such as security, stock accuracy,
optimizing the use of space, reducing surplus and obsolete stock and
stocktaking.
o
Identify and correct problem areas in your inventory management
systems.
o
Discuss
various techniques for safely and effectively managing inventories and optimizing
services to clients.
o
Provide
for effective management, including disposal, of surplus, scrap and excess
inventory.
Who Should Attend
·
Employees
with supply responsibilities in organizations in the private, public and
governmental sectors.
·
Factory
and inventory control professionals, manufacturing and production control
managers, industrial engineers, plant managers, material and purchasing
managers, factory manager and customer/technical service managers who can
benefit from enhancing their inventory management techniques
·
Logistics
managers and personnel
·
Warehouse
managers and personnel
·
Intended
for Finance,
procurement, and supply chain professionals looking for ways to become more
effective and efficient by improving their inventory management methodologies.
Training Contents
Session - 1
o
What is an 'Economic Order Quantity – EOQ?'
o
How Inventory Impacts Cash-Flow Planning
o
Factoring in a Reorder Point
o
Example of Using EOQ
o
'Carrying Cost Of Inventory'
o
Total Cost of Ownership
o
'Days Sales Of Inventory - DSI'
Session - 2
o
Inventory Turnover
Session – 3
Session -4
Methodology
Interactive Lectures, Individual and Group Dialogue,
Power point presentation. Video Exposure. Lecture Sheets.
