Related Local Literature Essay

This examine deals with the review and analysis of the literary productions and studies relevant to scrutinise heed techniques that the re seeers pass on be using in the optimization. It consists of information culled from studies and literature, both local and foreign, from which this conceive is subject to. This chapter will certainly dish up in giving the ratifier a better understanding of what is Economic Order Quantity mould and Dynamic Programming to optimization of the schedule step to the foreline.Definition archiveInventory refers to any kind of resources having economic value and is maintained to fulfil the set up and future needs of theconsumers.It is a physical stock of items that business or production enterprise keeps in hand for efficient running of affairs or its production. Inventory is the measure of goods, raw materials or other resources that argon idle at any given localize of time. Inventory run across is the means by which materials of the co rrect quantity and quality is made addressable as a when required with due regard to economy in computer memory and parliamentary lawing make ups and working capital. It is in any case be as the systematic location, storage and spiriting of goods in such a authority that desired degree of overhaul keister be made to the direct shops at a minimum ultimate monetary value (S.C sharma (1999). P. 509, 512).Inventory posture Economic Order Quantityand Dynamic ProgrammingFor over a century, the literature encompassing hundreds of books and journals has included frequent writings of wariness scientists applying quantitative methods to help gillyf overthrow managers make two critical decisions how much inventory to order, and when to order it.Inventory management started as early as the beginning of the twentieth century when F. W. Harris origin anyy developed the lot size formula or the EOQ model in 1915. R. H. Wilson on an item-by-item basis developed the same formula in 1 918. App arntly, Wilson popularized the model so the EOQ model is also referred to as the Wilson EOQ model.The EOQ formula has been independently discovered much times in the last eighty years. It is simple and engrosss several unrealistic assumptions. In Cargal discussed the basic EOQ model he tell that they cannot determine what quantity of an item to order when ordering supplies. Despite the many more sophisticated formulas and algorithm on tap(predicate), some large corporations still use the EOQ formula. In general, large corporations that use the EOQ formula do not inadequacy the public or competitors to know they use something so unsophisticated.The variables, graph, and the formula was also discussed in this paper. The classic EOQ model has been directly used in work go forth but which, more importantly, represents the key foundation of decision rules dealing with more complicated circumstances.Different variations and applications of the EOQ model in production and inventory operations were grow over the years such as dealing with the quantity discounts, shelf-life considerations, replenishment lead time and constraints on the replenishment. Further advancements in inventory management took place when dynamic programming was used, with R. Bellman as its founding father. However, earliest works in DP were produced by Arrow, Karlin and Scarf.Bellman, who popularized DP, used the stochastic models for the inventory management problems. But in 1958, Wagner and Within started with a deterministic model, referred to as the Wagner-Within method, with known demands in each expiration, and fluctuating be from one period to the next. A few years later, results for the stochastic model were established by Iglehart and Wagner with Veinott, which involves a demand with a continuous diffusion.Inventory models have been utilize and adapted by organizations. Silver enumerated the extensive research and application do over the years. In retail invento ry management, retail step to the forelets are progressively adopting equipment that permits capture of demand data and updating of inventory records at the point of sale. In integrated logistics, a very complex system, it utilizes operations inventory management where maintenance, transportation and/or production are involved. In inter telephone subprogramions with marketing, inventory management is applied on how to routinely take account of the effectuate of promotional activities on the control of inventories, how to predict and account for the effects of the system on the demand pattern, and the allocation of the shelf space in outlets such as supermarkets. take on InventoryThe American Institute of Accountants defined the term inventory as the aggregate of those items of tangible property which (1) are held for sale in the ordinary course of business, (2) are in butt on of production for such sale or (3) are to be available for sale. In Nigeria, inventory is usually refe rred to as stock-in-trade or work-in-progress. Stock may consist of (i) Raw materials and supplies to be consumed in production (ii) work-in-progress, or partly manufactured goods, (ii) Finished stock or goods ready for sale. Stocks are valued in a fundamentally different way from heady assets the latter are usually valued at embody slight accumulated depreciation. No method of stock valuation is suitable for all types of business in all circumstances. Stock is valued at greet less any part of cost, which needs to be written transfer when net realizable value or the replacement bell is lower than cost.The Functions of InventoryInventories perform a number of vital functions in the operations of a system, which in turn makes them critical to the production sector as well. Without inventories, organizations could not hope to achieve smooth production flow, obtain sightly utilization of machines and akinly handling cost or expects to give reasonable service to customers. The basic function of inventories whether they are raw materials, work-in-progress or done for(p) goods are that of decoupling the operations involved in converting inputs into outputs.This allows the successive stages in the purchasing, manufacturing and distribution process to operate reliance on the schedule of output, of prior activities in the production process. Furthermore, the decoupling function allows both time and spatial separation amid production and consumption of products in the operating system. Lastly, inventories can also be used for other purposes apart from the decoupling functions. For example, when inventories are displayed, they serve as promotional investment. Raw materials and finished inventories are frequently accumulated to wedge against price rises, inflation and strikes.Inventories also serve to smooth out irregularities in supply. In essence, inventories act to decouple organizational activities, thereby achieving lower costs of operations. Inventories a ct to reduce procurement costs, and inventories act to provide good customer service and smooth production flow by providing onetime delivery and avoiding high-priced stock shortages. Inventories ordered in large quantities can result in lower freight charges and price discounts. On the other hand, inventory requires fix up capital that would otherwise be invested elsewhere.Inventory also requires pricey storage space and such costs as insurance, spoilage obsolesce, pilferage and taxes moldiness be incurred as a result of maintaining inventory. Hence, there is an appropriate hazard cost associated with their value. It is therefore, the duty of the management to expectk decision rules that will in reality balance these controversies of costs for a given system. It is in response to this management quest for guidance in handling inventory decision situations that a number of techniques (models) have been developed to serve as aid to management in achieving optimal inventory solu tions.Inventory CostThe objectives of materials management are to minimize inventory investments and to maximize customer service. It is a plan to see that, the goals can be inconsistent or even indirect conflicts the bureau of the materials management is thus to balance the objective in relation to the active conditions and environmental limitations. The basic object of inventory management is to maximize customer service through maintaining appropriate amount of inventory with minimum doable cost. Inventory costs are costs associated with the operation of an inventory system. consequently the relevant costs included inventory are the followingThe buy cost (P)The barter for costs of an item are the unit purchase it is obtained from an external source or the unit production costs it is produced internally. For the purchase items it is the purchase costless modified for different quantity levels manufacturing items the unit cost include direct labour or company overhead. Order ing or set up cost (C)This is the cost of placing an order. This cost directly with the number of order or setups placed and not at all weight-lift the size of the order. The ordering cost included making analysing materials inspecting materials follows up orders and doing the touch necessary to complete the transaction. Carrying costs or holding costs (H)There are costs of items (inventories) in storage.These costs vary with the level of inventory and at times with the length of item an item is held. The greater the level of inventory overtime, the high the caring cost caring casts can be included the costs of losing the use of funds field up in inventory like storages casts such as rent of building heating cooling righting security, record keeping, deprecation obsolescence, product deterioration etc. Stock out cost (shortage cost) This is the cost as a result of not having items in storage.This can bring loses of good will profit loss of incur patronage order cost and delay i n the customer service. Establishing the correct quantity to order from vendors or the size of lots submitted to the firms productive facilities involves a search for the minimum total cost resulting from the combined effects of fewer individual costs holding costs, setup costs ordering costs and storage costs (Tersine, R.J, 1994. PP. 13-15)Inventory Costing MethodThere are terce methods of inventory costing method. These areFirst in First out (FIFO)This method is based on the assumption that costs should be computed out in the order in which incurred. Inventory is thus stated in impairment of recent costs. Last in First out (LIFO)is a method based on the assumption that goods should be charged out the latest cost be the latest cost be the starting line that are charge out. Inventories are thus stated in terms of earliest cost.Weighted average method is a method based on the assumption that goods should be charged out at an average cost such average being influenced by the nu mber of unites acquired at the price. Inventories are stated at the same weighted average cost.