Inventory Decision Control & Quantity Discount Model

M.Umer

Reg No.0116

Inventory:

“Any stored resource used to satisfy a

current or future need”.

• 50% of capital as a inventory in some organization.

• Excessive inventory level is costly.

• Insufficient inventory level lead to stock outs.

Main uses of Inventory:

Decoupling functionStoring resourcesIrregular supply & demandQuantity DiscountsAvoiding stock outs and shortages

Inventory Control Decision:How much to order ?When to order?

How much to order ?EOQ helps us in this step and also oldest well known

inventory control system & easy to use. And we are

searching the point where: OC = CC

EOQ = 2* AR* OC

C.C

Inventory Control Decision:

When to order ?It is a important step and Reorder level of

inventory helps to manager take decision.

And to avoiding Danger level of inventory and

Danger level inventory is 25% inventory in stock.

ROP = Annual Demand Lead time

Quantity Discount Models:

A quantity discount is a reduced unit price based on purchasing a large quantity.

Example: