1.1 Introduction
Inventory management is the direction and control of activities with the purpose of getting
the right inventory in the right place at the right time in the right quantity in the right form
at the right cost. It determines when to order products, how much to order, identify source
of supply in each stocking location. Inventory management includes all activities of
forecasting and replenishment.
Since inventory is an important element in operation, activities controlling the level of
inventory generally would affect significantly to a company. Thus, Inventory are held in
order to manage and hide from the customer the fact that manufacture/supply delay is
longer than delivery delay, and also to ease the effect of imperfections in the
manufacturing process that lower production efficiencies if production capacity stands idle
for lack of materials. (www.wikipedia.com/inventorymanagement)
The various activities listed are used to control inventory and planned for replenishment.
They are process pooling, Kanban, classical Economic order quantity, part-delivery part
production order quantity model, backorder model and quantity discount model.
On top of the various replenishment policies, the counting systems for inventory are
periodic system, perpetual system and the 2 bin storage system. The counting system helps
to maintain and estimate the remaining actual number of stock left in the physical
warehouse excluding the factor of emergency, loss and spoilage due to wear and tear.
In order to be able to keep track of the inventory, Stock Keeping Unit (SKU) is used by