Inventory Management: A Case Study
Inventory management performs a significant function in maintaining specific operating requirements for a business (Stewart, 1997). Inventory involves taking stocks for a business to sustain its operation and meet consumer demands. It is considered as one of the most valuable assets because the turnover of inventory represents the primary sources of income and earnings for the company (Shue, Chen, & Shiue, 2009).
Maintaining a specific level of inventory is vital because high level inventory and stock out significantly affects the profitability of the business. Possessing high level of inventory for a long period of time tends to increase operating cost due to inventory storage, dead stocks or items that are not selling, and spoilage costs of perishable items.On the other hand, stock out or failure to maintain adequate amount of product supply affects customer satisfaction which might lead to disappointments of potential customers and opportunity to lost
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It helps retail business forecasts the inventory movement and level of demand for the two particular products. Monitoring the sales activity of each product in the store is important to track the best sellers and seasonal items that would regularly experience sales at various times of the year or specific period of time.The inventory data could be used to manage the order quantity of the items and determine the reordering time.Further, simulated inventory modelhelps to minimize the total inventory costs by holding costs and balancing the supply and demand to avoid stock outs. However, the EOQ model limits the retail business because uncertainty in the market makes it difficult to determine optimal inventory to sufficiently respond to consumer demand. It assumes steady state of demand and immediate availability of the product to be
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