Inventory is a large cost for many organizations. The appropriate amount to order and how often to order impact the firm's bottom line. The EOQ model seeks to minimize total carrying and ordering costs by balancing purchase costs, ordering costs, carrying costs and stockout costs . Communication, coordination, and cooperation are required from supervisors and employees to deliver the smallest possible quantities at the latest possible date at all stages of the transformation process in order to minimize inventory costs. Measure Actual Performance.
Supervisors collect data to measure actual performance to determine variation from standard.
Written data might include time cards, production tallies, inspection reports, and sales tickets. Personal observation, statistical reports, oral reports and written reports can be used to measure performance. Management by walking around , or observation of employees working, provides unfiltered information, extensive coverage, and the ability to read between the lines. While providing insight, this method might be misinterpreted by employees as mistrust. Oral reports allow for fast and extensive feedback.