- The economic order quantity [EOQ] approach is useful, when order quantities are predictable, & fairly constant through out the year
- EOQ approach does not work well to determine the inventory levels of parts & materials used for production processes. For example poor quality of parts may increase the demand for these production inputs. Thus demand is likely to be intermittent, resulting in inventory shortages at sometimes & excesses at other times
- If the demand keeps on fluctuating, the organization maintains inventory of semi-finished goods. This is called as Work-in-Process inventory.
- Carrying inventory of any types adds to the cost of output. But in competitive environment, cost has to be kept under control
What is Inventory Plan & Control?
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