Inventory Policy

Published: 2021-09-10 14:25:09
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Inventory PolicyDavid MbayaJomo Kenyatta University of Agriculture and Technology28th June 2013IntroductionAn inventory policy can be described as the customary set of guidelines and rules that an organization follows in order to make timely and informed decisions on the stock to manufacture or purchase in terms of quantity and quality and on where to store the goods and distribute them to customers (Muller, 2011). Absence of planning and such kinds of product knowledge coupled with other parameters like safety, stocks and lead time call for a stock policy that must be monitored and applied regularly against the projected future demand (Nahmias, 2011). The best method of implementing applicable planning parameters settings and elevated position in the stock market is done by evaluating the variability between monthly historical sales and the forecasted demand. It is in this order that several stocking policies may be applied to improve the stock management performance. These are; min/max, reorder point, lot for lot, item location and days of supply (Muller, 2011). For an inventory policy to be effective, it has to have the following parts,ABC ClassificationSafety stock levelsThe level of inventory at stocking points or locationsNumber of warehouses or nodesNumber of stocking points or nodesOrder quantity and order frequencyReplenishment quantity and replenishment frequencyLead time from suppliersStock obsolescenceSlow moving stockInventory ProceduresAmong the major challenges facing most organisations are those of managing their inventory effectively in an attempt to minimize the inventory investment at the same time using the available resources more efficiently with an inventory or planning management function. It is therefore recommended that there be uttermost understanding of the inventory profile of the company in question with detailed information of what it offers to the clients, recent levels of inventory, frequency of movement and the rate of sales of products at all the levels of SKUs (Muller, 2011).A Typical Inventory Policy for a Clinic[pic 1]Figure 1: An inventory policy for a clinic     As depicted in Figure1 an ideal inventory policy must conform to the characteristics regardless of the company or organisation in question (Saxena, 2009). In this particular inventory policy, the clinic does the monitoring of the entire inventory then goes ahead to order. The essence of this mode of approach is to make sure that only necessary things are procured. The wholesaler on the other hand goes through the order and processes it by stock checking, packaging and finally delivering to the client; the clinic. The chain ends after the client receives their order but may keep on recurring.

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