Inventory Management

PRELIMINERY
Inventory management is essential in determining the long-term kompetatif excellence. Quality, engineering, product, price, overtime, excess capacity, the ability to respond to customers due to poor performance,
lead time (lead time) and overall profitability are the things that are affected by inventory levels. Companies with higher inventory levels than the competitors tend to be in a weak competitive position. Wisdom of inventory management has become a competitive weapon to win. In manufacturing companies, inventories consist of raw materials inventory,
goods in process and finished goods inventory. Inventory management will be discussed here is more focused on inventory management of raw materials. management
inventories of raw materials intended to make adequate inventory levels of raw materials, not too much but not too little, so the cost of raw materials economical and the company does not lose the opportunity to serve the sales due to lack of raw material inventory.

Elements of Cost of Raw Materials
There are four groups of costs that affect the cost of inventory
raw materials, namely:
1. Invoice price.
Invoice price is the price agreed between the company and its suppliers. Pieces of the purchase will reduce the invoice price, freight costs incurred while the company is treated as an additional invoice price.
2. Cost of Raw Materials Buyer.
This cost is also called the procurement cost or ordering cost is the cost incurred in executing the purchase
raw materials.
  These costs are grouped into two namely:
  a. Buyer Fixed Costs
  b. Buyer Variable Costs
3. Cost of Raw Materials Storage. The cost of storage is also called the cost or carrying cost is the cost incurred in carrying out activities to be ready for storage of materials used in production activities.
  These costs are grouped into two namely:
  a. Fixed Storage Cost
  b. variable BiayaPenyimpanan
4. Insufficient Inventory costs. These costs arise because of raw material inventory that is not sufficient to meet production needs. These costs include: costs of the loss of sales, additional transport costs due to purchased
suddenly, the demands of customers because of delays and additional costs due to irregular production process.


Has Reasons Supplies
Maximum profit that can be achieved by minimizing the costs associated with inventory. However, minimizing the cost of the preparation can be achieved by ordering or produce in small quantities, while minimizing the cost of ordering can be achieved by an order of large and sparse. So minimizing the number of inventory storage costs encourage a little or none, while minimizing the cost of reservations must be made by an order of inventory in a relatively large amount, thereby encouraging a large amount of inventory.
The second reason that prompted the company to keep inventory in a relatively large amount is a matter of demand uncertainty. If the demand for materials or products larger than expected, then the inventory can serve as a buffer, which gives companies the ability to meet the delivery date so that the customer is satisfied. In general, the reasons for having inventory is as follows:
1. To balance the cost of ordering or preparation and storage costs.
2. To meet customer demand, such as keeping delivery dates.
3. To avoid the closure of manufacturing facilities due to:
  a. damage to the machine
  b. damage to components
  c. Unavailability of component
  d. The late delivery of components
4. To refute the production process is not reliable.
5. To take advantage of discounts
6. To deal with rising prices in the future

Economic Order Quantity
Variable ordering costs and variable storage costs have an inverse relationship, ie the higher the frequency of ordering, the lower the variable cost of storage. Costs to variable ordering and variable storage costs can be kept to a minimum, it is necessary to find the most economical purchase amount

Reorder Point
In order for the purchase of materials that have been defined in the EOQ does not interfere with the smooth production activities, it will take re-ordering of raw materials. Factors affecting the reorder point is:
1. Lead Time. Lead time is the time required between the raw material in the company booked up till. This lead time will affect the amount of material
standard that is used during the lead time, the longer lead time, the larger the material needed during the lead time.
2. Consumption levels of raw materials the average union time.
3. Inventory Safety (Safety Stock), which is the minimum amount of inventory of materials that must be owned by the company to maintain the possibility of delays in arrival of raw materials, so there is no stagnation.


Safety Stock
To estimate the amount of safety stock, can be used relatively more accurate way is by using the following method:
1. Maximum Difference Method Use and Average.
  This method is done by calculating the difference between the maximum usage with average usage in a certain period (eg weekly),
then the excess is multiplied by the lead time.
2. Statistical Methods. To determine the amount of safety stock with this method, it can be used least squares computer program (least square)


Just In Time
JIT is an approach to minimize the total cost of storage and preparation are very different from traditional approaches. The traditional approach recognizes the cost of preparing and then determine the quantitative orders which is the best balance of the two categories of costs. On the other hand, the JIT does not recognize the cost of preparation, but instead JIT tried to suppress these costs to zero. If the cost of preparation is not to be significant, then the remaining cost of the
be minimized is the cost of storage, which is done by reducing the level of inventories to very low. This approach is encouraging to zero inventory in the JIT system.
Most of the cessation of production occurs because one of three reasons: engine failure, damage to materials, and the unavailability of raw materials, so having inventory is one of the traditional solution to all problems
them.
Those who support this approach argue that JIT inventory that many will not solve the problem, but only to disguise or covering problem. JIT can solve all three problems mentioned above with the emphasis on total maintenance and total quality control and fostering good relations with suppliers.