Question

Galfar Engineering & Contracting SAOG (Galfar) is the Oman's largest construction company. The company believes that a proper inventory control system (techniques) helps the enterprise in solving the problems of liquidity, eliminating excessive stocks, and achieving increased profits, with substantial reduction in working capital. Critically evaluate the possible different inventory control systems adopted in the company in the light of above information.

Answer 1

Galfar Engineering & Contracting SAOG (Galfar) is the Oman's largest construction company.it needs to adopt a proper inventory control techniques some of the important techniques are discussed below:

ABC analysis stands for Always Better Control Analysis. It is an inventory management technique where inventory items are divided  into three categories namely: A, B, and C. the inventories which are listed in the A category are the most essential items ,they are most expensive and very less in number, the A category items requrires tight control and management while B category items are moderate in nature ,they are not too expensive or not too cheap they requires a moderate control  The C category consists of a high number of inventory items which require lesser investments so the control level is minimum.In this method importance of each item is recognized,generally this method is adopted by the company where their are several types of inventories

Just in Time method of inventory control is one of the effective method.In this method companies only keeps the amount of inventory it requires With no excess inventory in hand, the company saves the cost of storage and insurance. it helps the manager reducing the overhead expenses as well  This is a little risky method of inventory management because a little delay in ordering new inventory can lead to stock out situation. Thus this method requires proper planning so that new orders can be timely placed.

Material Requirements Planning is an inventory control method in which planning is done about the inventory after checking the sales or demand of the product  Based on the data and demand in the market, the manager would place the order for new inventory with the material suppliers.it ensures very less wastage and timely availabilty of inventory,it helps in reducing the rental cost of not keeping excess inventory .company can remain liquid and can spend the money in other operations as well

Economic Order Quantity technique requires  a decision regarding how much quantity of inventory should the company order at a particular point and  when should they place the order. A firm should place optimum orders and neither too large nor to small.In this model, the store manager will reorder the inventory when it reaches the minimum level. EOQ model helps to conserve the ordering cost and carrying costs occured  while placing the order. With the EOQ model, the organization is able to place the right quantity of inventory.

the another method is minimum safety stock- the level of inventory which an organization maintains to avoid the stock-out situation. it is a minimum level of stock which should be maintained at any cost. for example, if the total inventory in an organization is 25,000 units, they place a new order when the inventory reaches 23,000 units. Therefore, the 2,000 units of inventory is essential for the company to maintained and reorder the stock at this point of time.it will help organization to never get out of stock and timely everything is available at the particular cost