Question

write about optimization in inventory management or in production planing . make the answer as long as u can please .

Answer 1

Inventory optimization is a process of balancing capital investment objectives and service level goals while managing a large assortment of stock keeping units and keeping the volatility of supply and demand into mind.

Every company faces the challenge of inventory management. The amount of inventory a company carries affects its profitability to a large extent. Gone are the days, when the company makes use of binge and purge inventory cycle, where the company overpurchase the product to meet possible hike in demand and then discard the excessive inventory. The level of inventory also affects the cash available and thus the companies maintain the lowest possible inventory .

While using non-optimization approach, a company generally decides the inventory based on rule of thumb or single stage calculation. Rule of thumb estimates the number of days as a supply target. Single stage calculation considers only one item in order to calculate the demand. Thus it leads to large investment in inventory. As a result inventory optimization is to be practiced in order to bring down the inventory levels to a nominal level and thus there would be no overpurchasing of the inventory.