Inventory Control Manager Interview Preparation Guide

The EOQ level is the point at which stocking costs are at their lowest point for a given item.

Inventories are semi-manufactured products. They represent products that need more work before they become finished product for sale.

☛ Inventory Control is the supervision of supply, storage and accessibility of items in order to ensure an adequate supply without excessive oversupply.
☛ It can also be referred as an accounting procedure or system designed to promote efficiency. Or we can say that it assures the implementation of a policy or safeguard assets or avoid fraud and error etc.
In Economics, Inventory Control helps in reducing the overhead cost without hurting sales.
In the field of Loss Prevention, Retail Inventory Control management helps in preventing shoplifting and other issues.

Inventory control is the process of reducing inventory costs while remaining responsive to customer demands. By this definition a store would want to lower its acquisition, carrying ordering and stock-out costs to their lowest possible levels. However a store would need to have enough inventories to meet any needs of its customers.

Total stocking cost is the cost to the store of holding a good in its inventory. The stocking cost consists of the carrying cost times half the quantity in inventory and the order completion cost times demand divided by the quantity. In its mathematical form the cost is represented by TSC=(Q/2)C + (D/Q)S.

In financial accounting, the term inventory shrinkage is the loss of products between point of manufacture or purchase from supplier and point of sale. The term shrink relates to the difference in the amount of margin or profit a retailer can obtain. If the amount of shrink is large, then profits go down which results in increased costs to the consumer to meet the needs of the retailer.

In retail terms, shrinkage refers to a company's percent loss resulting from damage, product expiration and theft of unsold products. Retail shrinkage can happen anywhere along the production and sale chain, including at the factory, in transit or at the retail location.

You can calculate retail shrinkage by dividing the value of goods lost to shrinkage by the total value of goods that are supposed to be in the inventory.

Shrinkage =
( Total value of the goods that you are supposed to have in your inventory - Total value of the goods that is physically stocked in your inventory )
/ Total value of the goods that you are supposed to have in your inventory.

i.e. Shrinkage = (Book stock - Actual Stock) / Book Stock
= Total Value of goods lost / Total value of the goods that you are supposed to have in your inventory

The value can be found using four methods in inventory control. The first is the specific cost in which each item's cost is added together for the inventory's value. A second method is to use the weighted average of the costs for a period to determine value. A third method is first in, first out. In this method value is measured using the latest costs of goods while working towards the beginning of the period until all goods in inventory are valued. The final method is last in, first out. In this method the costs of gods at the beginning of the period are used to determine the inventory's value much like FIFO.

To determine which numbers to use you must look for the following items. The number of items per order is the quantity(Q). The number of items that can be sold is D. D may be the forecast demand for that particular good. The cost of placing the order is used for S. The final number to find is the carrying cost(C) which is the cost of the item to be held in inventory.

A good forecast model will have reasonable costs. the accuracy of its forecasts will allow good decision making. The model will have ample data available for its use and a relevant time span. The model finally will have a low interference level.

Yes, in order to compare stock costs when using the EOQ model you must compute the costs for both the original level and the EOQ level of order quantities.