Advantages and disadvantages of inventory management
Answers
Answer:
Advantages:
Each material can be procured in the most economical quantity.
Purchasing and inventory control people automatically gives their attention to those ite which are required only when are needed.
Positive control can easily be handled to maint the inventory investment at the desired level o by calculating the predetermined maximum an minimum values.
Disadvantages:
Sometimes, the orders are placed at the irregu time periods which may not be convenient to t producers or the suppliers of the materials.
The items cannot be grouped and ordered at a time since the reorder points occur irregularly.
If there is a case when the order placement ti is very high, there would be two to three order pending with the supplier each time and there likelihood that he may supply all orders at a ti
EOQ may give an order quantity which is much lower than the supplier minimum and there is always a probability that the order placement level for a material has been reached but not noticed in which case a stock out may occur.
The system assumes stable usage and definit lead time. When these change significantly, a new order quantity and a new order point sho be fixed, which is quite cumbersome.