An inventory system is of significance for every business irrespective of its size or specialization. It is so because this phenomenon deals with purchasing and receiving goods, analyzing orders, distributing them to customers, and others. Thus, companies should invest their resources and effort to manage such systems adequately. There are three various inventory control models, including fixed-order quantity, fixed-time period, and ABC analysis models, and each of them has an appropriate driving factor (Jacobs & Chase, 2014).
Also known as economic order quantity, a fixed-order quantity model is one of the oldest production scheduling approaches (Kumar, 2016). It establishes the most economical size of orders to keep the ordering and carrying costs low. In other words, this model initiates an order when a company reaches a specific inventory level. For example, Procter & Gamble uses this model because the driving factor of the latter is to minimize the carrying and ordering costs.
A fixed-time period model stipulates that one should place orders in fixed intervals of time, while the order quantity can vary (Jacobs & Chase, 2014). The main driving factor of the given approach is to drive down inventory costs, which is beneficially used by, for example, Toyota. Finally, an ABC analysis model focuses on the driving factor that inventory items can have various meanings for a company, which stipulates that they deserve different attention (Nemtajela & Mbohwa, 2016). San Miguel is a suitable example of how a company can benefit from the ABC analysis model.
In conclusion, one can say that modern companies can use the three inventory control models above. Each of these approaches implies its own peculiarities and advantages, which means that businesses are free to choose the variant that is suitable for them. Thus, it is possible to mention that the choice of a specific variant depends on what objectives a firm wants to reach with the help of an appropriate model.
References
Jacobs, F. R., & Chase, R. (2014). Operations and supply chain management (14th ed.). McGraw-Hill Education.
Kumar, R. (2016). Economic order quantity (EOQ) model. Global Journal of Finance and Economic Management, 5(1), pp. 1-5.
Nemtajela, N., & Mbohwa, C. (2016). Inventory management models and their effects on uncertain demand. Proceedings of the 2016 IEEE IEEM, 1046-1049.