HA Mwansele,FJ Sichona,RRJ Akarro
Many firms/industries, whether manufacturing or purchasing, face great challenges in managing inventories. Poor inventory management may result in under-stocking, overstocking as well as high inventory total cost. This paper examines inventory situation at Urafiki Textile Mills Co Ltd in Dar-es-Salaam, Tanzania. The objective of this paper is to develop the Economic Order Quantity (EOQ) model that will be used to determine number of units of an item to order at a time and the re-order point (r), that is the level to which stocks of items are allowed to fall before ordering other items, for raw materials. The resulting EOQ for each raw material is compared to the actual ordered quantities so as to see whether there is any relationship between them in operational cost reduction. The study used cross section secondary data from Urafiki. The comparison of operational cost reduction was done by using normal distribution test. Excel was used to find EOQ and the re-order point. The results show that the relationship between the EOQs and the ordered quantities at Urafiki in terms of operational cost reduction was significant. Therefore, it was concluded that the ordered quantities at Urafiki Textile Mills were not optimal. Therefore, it is recommended that in order to manage inventory effectively, Urafiki needs to employ inventory control methods such as the EOQ model to obtain reasonable ordered quantities for its raw materials. The inventory level to be maintained is given in the text.
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