To effectively manage inventory, a manager should use EOQ formulas when inventory levels are independent, and JIT and MRP when inventory levels are dependent on the number of products to be produced.

Question

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EOQ (Economic Order Quantity) formula is used to determine the optimum order quantity that minimizes total inventory costs, for independent demand products. JIT (Just-in-Time) and MRP (Material Requirements Planning) are used for managing inventory levels when they are dependent on the production schedule and demand forecasts, for dependent demand products. Therefore, to effectively manage inventory, a manager should use EOQ formulas when inventory levels are independent, and JIT and MRP when inventory levels are dependent on the number of products to be produced.

To Effectively Manage Inventory, a Manager Should Use EOQ Formulas