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ASSIGNMENT INSTRUCTIONS:
Explain the three inventory control models and the driving factor in each model. Provide examples for each one using current companies.
HOW TO WORK ON THIS ASSIGNMENT(EXAMPLE ESSAY / DRAFT)
Inventory control is the process of managing inventory levels and ensuring that businesses have the right amount of stock at the right time to meet customer demand. There are three primary inventory control models: Economic Order Quantity (EOQ), Just-In-Time (JIT), and Materials Requirement Planning (MRP). Each model has its driving factor and is useful for different types of businesses. In this essay, we will explore each inventory control model in detail, and provide examples of current companies that use them.
The first inventory control model is Economic Order Quantity (EOQ). The driving factor in this model is minimizing inventory costs. EOQ determines the optimal amount of inventory to order at one time to minimize holding costs and ordering costs. The goal is to find the sweet spot where the cost of holding inventory is balanced against the cost of placing orders. To calculate the EOQ, businesses need to consider their demand rate, ordering cost, and holding cost. One example of a company that uses EOQ is Walmart. Walmart is known for its efficient supply chain and uses EOQ to optimize its inventory levels and reduce costs.
The second inventory control model is Just-In-Time (JIT). The driving factor in this model is reducing waste and improving efficiency. JIT is a pull-based system that aims to produce goods only when they are needed. The goal is to minimize inventory levels and reduce the amount of waste created by overproduction, excess inventory, and defects. To implement JIT, businesses need to have reliable suppliers and efficient production processes. One example of a company that uses JIT is Toyota. Toyota has been a pioneer of JIT, and its production system has become a benchmark for other companies to follow.
The third inventory control model is Materials Requirement Planning (MRP). The driving factor in this model is managing complex production processes. MRP is a push-based system that calculates the materials needed to manufacture a product based on a production schedule. The goal is to ensure that the right materials are available at the right time to meet the production schedule. To implement MRP, businesses need to have a clear understanding of their production processes and a reliable system for tracking inventory. One example of a company that uses MRP is General Electric. GE uses MRP to manage its complex production processes and ensure that it has the right materials available to meet customer demand.
In conclusion, inventory control is critical for businesses to optimize their operations and reduce costs. The three primary inventory control models – EOQ, JIT, and MRP – have different driving factors and are useful for different types of businesses. Walmart uses EOQ to optimize inventory levels and reduce costs, Toyota uses JIT to minimize waste and improve efficiency, and General Electric uses MRP to manage complex production processes. By understanding the driving factor of each inventory control model and its application in real-life examples, businesses can choose the most appropriate model to meet their needs.
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