Inventory Control System: a comparative study on Economic Order Quantity (EOQ) model and Just-In-Time (JIT) system / Zaliana Zainuddin

Inventories should be properly managed. The importance of an effective inventory management is directly related to the size of investment in inventory. A sufficient level of investment in inventory is necessary so that the various functions are effectively uncoupled. A lower investment in inventory will increase the rate of return and also increase the value of the firm. However, by reducing the inventory investment a firm is subject to lost sales due to stock-out or to costly production slowdown. Therefore, managers should maintain inventories at levels which balance the benefit of reducing the level of investment against the costs associated with holding smaller inventories.