How do you optimize economic order quantity? Actually, this has a history that goes back as far as business itself. Inventory management has been a key focus of the manufacturing sector since its inception. Truly, even though operations employment today can include gadgetry such as computer databases to manage and keep track of inventory better, the essential elements haven't changed.
What used to be called ''minimum cost quantity'' is now called ''economic order quantity.'' Even so, though, a lot of companies don't know a lot about managing inventory appropriately, and this can be a big boon to you with operations jobs if you're looking for employment and have experience with this type of optimized inventory management.
First of all, if you are going to engage in proper inventory management, it has to be accurate. Basically, it does you no good (and can even hurt your bottom line) if you don't keep track of inventories properly so you have the knowledge you need to keep things that ''minimum cost quantity'' or ''economic order quantity.''
So the first thing you're going to need is accurate data. All of the tools and gadgets in the world can't give you accurate results if you don't input accurate data into them. And unfortunately, a lot of the tools in today's software have automatic economic order quantity calculations built in, such that if you're the one managing the software, you may not even know how totals are calculated. So it behooves you as someone looking for operations employment to know the bare bones of those calculations and to make sure they're accurate; once you know the process and can check it out and tweak as needed, then you can let the software do the calculations for you, not before.
It's also important not to ignore calculations that appear very inaccurate. This only compounds the problem.
There are also other types of problems you may have to consider in operations careers as they relate to economic order quantity. For one, if your employer has different viewpoints; whereby the calculated economic order quantity doesn't match what the company wants to see happen; this can be a problem. So it may very well be a good idea to focus on company or management goals instead of how fast your inventory turns, or at least make that a main priority. It's not very smart, for example, to increase inventory turns, even though you hurt your profit because you've also increased your operational costs. So a balance is needed there, and this is one of the things to keep in mind with operations careers.
When it comes to figuring out the most cost-effective quantity of inventory to order, you have to determine what the balance between inventory carrying costs and order costs should be to give you the most cost-effective. Your software may or may not be able to help you do this, or you may be able to set the calculations so that they will calculate accurately automatically once you've set them yourself. Optimal inventory control is among the most important facets of operations jobs, and something you should know about if you want to get into this as a career.
