Inventory Production Methods
Inventory production methods essentially describe the different ways within which inventories can be created and controlled. The production output of a factory or manufacturing facility can be broadly categorized into four main categories of inventory production methods known as the 4Rs. These are, Reorder Stocking, Reorder Point, Reorder Quantity, and Reorder Frequency.
Reorder stocking
Reorder stocking is the simplest of the production methods. The inventory is kept at a predetermined level and replenished when it reaches that level. This method is best suited for higher volume items, as it is relatively easy to monitor inventory levels and to maintain consistently high inventory levels.
Reorder point
Reorder point is the second most common inventory production method. In this method, the inventory is replenished whenever it reaches a predetermined reorder point. The reorder point is typically determined based on the needs of the organization and the demand for the product. This method is best suited for items that experience large fluctuations in demand, as it helps to keep the inventory at a consistently appropriate level.
Reorder quantity
Reorder quantity is the third type of inventory production methods and is best suited for items that have regular, predictable demand patterns. In this method, the inventory is replenished in predetermined quantities and at predetermined intervals. This helps to ensure that the inventory is replenished at the right levels and on time.
Reorder frequency
Reorder frequency is the fourth and last type of inventory production method. In this method, the inventory is replenished by a predetermined set of rules or guidelines. This method helps to ensure that the organization is able to plan its inventory and be prepared for any sudden spikes in demand. This method is ideal for items that have irregular demand patterns or unpredictable demand.
Conclusion
Inventory production methods are essential for the efficient production and management of inventory. Each method is best suited for different types of items, which means that it is important to understand the needs and demand patterns of your organization and the items it produces to select the most appropriate inventory production method. By using the right inventory production method, organizations can improve inventory management and boost production efficiency.
