Optimum productions run: The use of the EOQ approach can be extended to production runs to determine the optimum size of manufacture. Two costs involved are set-up costs and carrying costs. Set-up costs include costs on the following activities: preparing and processing the stock orders, preparing drawings and specifications, tooling machines set-up, handling machines, tools, equipment and materials, over time etc. Production runs but carrying costs will increase as large stocks of manufactured inventories will be held. The economic production size will be the one where the total of set-up and carrying costs is minimum. Reorder Point: The problem, how much to order, is solved by determining the economic order quantity, yet answer should be sought to be second problem, when to order. This is a problem of determining the reorder point. The reorder point is that inventory level at which an order should be placed to replenish the inventory. To determine the reorder point under certainty, we should known: (a) lead time (b) average usage, and (c) economic order quantity. Lead time is the normally taken is replenishing inventory after the order has been placed. By certainty we mean that usage and lead time do not fluctuate. Under such a situation, reorder point is simply that inventory level which will be maintained for consumption during the lead time. That is:
A PROJECT REPORT ON INVENTORY MANAGEMENT SYSTEM A STUDY OF JOHNSON & JOHNSON LTD.
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