The re-order quantity is also termed as economic order quantity if it can be acquired at the minimum cost. Writing a scope statement is very daunting as writing an for project managers because they know that a scope statement is quite tricky and complicated to write. Carrying cost is calculated on the basis of average inventory. The total cost at re-order quantity may not be the least. Such materials should be stored beyond the maximum level during the season.
A systematic recodes of inventory helps provides such information to the management. It is also an important objective of holding the inventory to take precaution from the above. It is also called procurement cost or processing costs of materials or set up cost. Formula method The formula has been developed considering that the total carrying cost is always equal with the total carrying cost. If the total cost under offer is less than the of eoq, the offer should be accepted; otherwise not.
In includes physical commodities used to manufacture the final product. Such level of material is fixed so that production may not be held up due to shortage of material. Scope statement should be clear and concise. Carrying cost It is the of holding a unit of inventory. Precautionary motive: due to different reasons, like shortage of inventory with the suppliers, week relation with the supplier, disturbance in transaction, delay in inventory supply etc. It should determine what the project consist and what are not part of the project.
The stock level can be calculated under two situations as given in the following table. There may be more chances of having obsolescent and deterioration of quality when the actual stock exceeds the. To minimize the risk of under and over stocking of material: inventory management maims to minimize the risk caused due to under and over stocking of inventory. Transaction motive: The manufacturing concerns need inventories of raw material and work in progress so as to maintain regular production activities. Demand of the inventory is uniform thought the year. .
Therefore, the inventory manager should try to maintain optimal size of inventory without disturbing the production and sales needs. Inventories are a part of current assets, which are used within one year. Inventory cost comprise the ordering or set-up cost and carrying or holding cost less discount if any. Managing the stock at lowest cost without compromising on the production and sales activities is called inventory management. To make stability in price: an effective inventory management system minimizes the effects of regular price fluctuation.
Stock level Stock level means the different levels of stock that an organization has to maintain to run its activities without any obstruction. It is also known as 'buffer stock', ' safety stock', minimum limit' or ' minimum stock', this represents the minimum quantity of the material which must be kept in hand at all the times. This means that a project should be specific, measurable, agreed upon, realistic and timely for it to be successful. Working capital: sufficient amount of working capital should be kept for maintaining the maximum level of stock. Carrying pieces of the inventory is known. So one of the main objectives of the inventory management is to minimize the risk caused due to under and over stocking of inventory. There the some assumptions for economic order quantity.
Inventory of inventory depends on certain risks and cost. When the number of orders increase, then total amounts of carrying cost decrease and vice-versa. This level should be fixed by taking into account as abnormal usages of material; unexpected delay in procuring the material etc. Minimum level is not need in the case of the material that is required against customer's specific order. Annual or total requirement is known and does not fluctuate. A scope statement, whether it is a product or project scope statement is very important in any or any.
The re-order quantity can be calculated as under. Under it, different types are calculated as per the requirement and purpose. Raw materials; raw materials is Avery importance and inevitable factor of production. Cleric and administrative costs of purchasing department. In a normal courses of business operation manufacturing organizations maintains the inventory of raw materials, work-in-progress, finished goods, spare parts, suppliers etc.
Time lag: the lead-time should be determined. The purpose of fixing this quantity is to avoid overstocking. From this level material are issued for some abnormal situations only. Go down space: for putting the material safely, there is a need to have sufficient space in go down requirement may arise at any time. If no information has been given, the minimum stock level should be assumed to be the safety stock lead time.