rganization's current assets, along with the organization's cash and receivables. The need for effective cash control and the need for effective procedures for monitoring and con trolling receivables are recognized by most managers. It is surprising how often these same managers overlook the need for effective procedures and practices for inventory management and control.
Inventory Management and Control Techniques
Inventory levels are, to a great extent, the product of inventory policies, and inventory policies are developed as a part of the overall planning and control process in an organi zation. There are a number of proven techniques for use in the
effective management and control of inventories. Several of these techniques are explained in the following discussions.
Economic order quantity (EOQ) is a well accepted concept in inventory management and control. EOQ means the determina tion of an optimum lot size for production runs, or an economic quantity for ordering goods from a supplier (Peters, 1986). In either instance, the purpose of EOQ is to equalize the cost of a production run or of a goods order with the cost of carrying the inventory (Brigham, 1989).
Material requirement planning (MRP) is a technique for use in the managment of production inventories. MRP takes into account the specific timing of material requirements. The cen tral objective of MRP is to minimize investment in inventory, consistent with specific production plans. MRP employs a step wise process, in which quantities to be produced or ordered are determined from the top down on what is termed a production tree (Wight, 1970). An MRP schedule denotes by day, week, and month the quantities of goods to be ordered or produced. Per ishable goods are produced, as well as consumed. Thus, the MRP technique is applicable to the management and control of perishable goods inventories.
MRP requires the access to and the use of an enormou...