Inventory Management

Let’s take a look at inventory management. Inventory is the amount and number of raw materials, parts, and finished products that a company has in its possession. There are four kinds of inventory a manufacturer stores: raw materials, component parts, work-in-process, and finished goods.

Economic order quantity (EOQ) formulas are intended for use with independent demand systems, in which the level of one kind of inventory does not depend on another. By contrast, JIT and MRP are used with dependent demand systems, in which the level of inventory depends on the number of finished units to be produced.