20 Essential Inventory Analysis Formulas for Supply Chain Professionals
Effective inventory management is essential for firms to maximise stock levels, minimise expenses and satisfy consumer needs. You can gain important insights into your inventory processes and make well-informed decisions by using the appropriate inventory analysis algorithms. 20 key inventory analysis formulae will be covered in this blog, along with a thorough description of each formula's constituent parts. 1. Economic Order Quantity (EOQ ) EOQ calculates the optimal order quantity that minimizes the total costs of ordering and holding inventory. EOQ = sqrt {2DS/H} D: Annual demand (units) S: Ordering cost per order H: Holding cost per unit per year 2. Reorder Point (ROP) ROP determines the inventory level at which a new order should be placed to avoid stockouts. ROP = (d × L) + SS d: Average daily demand L: Lead time (days) SS: Safety stock 3. Safety Stock Safety stock is the extra inventory held to prevent stockouts due to demand variability or supply dela...