Explain the three inventory control models and the driving factor in each model. Provide examples for each one using current companies|Legit essays

Posted: February 13th, 2023

Explain the three inventory control models and the driving factor in each model. Provide examples for each one using current companies.

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There are three primary inventory control models:

  1. Fixed Order Quantity Model: This model determines a fixed order quantity, which is the exact amount of inventory that should be ordered at once. The driving factor in this model is to minimize the total cost of ordering and holding inventory. Example: A company that sells a limited number of slow-moving products and wants to keep its inventory costs low, such as a small hardware store that only stocks a few types of screws and nails, might use this model.
  2. Fixed Time Period Model: This model determines a fixed time period, such as weekly or monthly, for ordering inventory. The driving factor in this model is to ensure that there is always a sufficient level of inventory available to meet customer demand. Example: A grocery store that sells a large number of fast-moving products with a short shelf life, such as milk, eggs, and bread, might use this model to keep its shelves stocked.
  3. Quantity Discount Model: This model offers discounts to customers who order larger quantities of inventory. The driving factor in this model is to encourage customers to order more inventory, which can reduce the overall cost of ordering and holding inventory. Example: A company that sells large quantities of products, such as office supplies or industrial equipment, might use this model to incentivize its customers to order more products at once and reduce its own inventory costs.

It’s important to note that different companies might use different inventory control models, depending on their specific needs and circumstances, and that some companies might even use a combination of different models.

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