Procurement Management
Procurement management can be defined as the independent monitoring or tracking of manufacturing processes to purchase order requirements. An implicit assumption of Economic Order Quantity (EOQ) analysis is that the purchase price per unit is constant. In an inflationary period, this assumption is not valid. If the rate of inflation is predictable the EOQ formula can be applied. The standard EOQ model assumes that materials can be procured instantaneously, and hence implies that the firm may place an order for replenishment when the inventory level drops to zero. In the real world, however sourcing-force.com , time is required for the procurement of materials, and hence the order level must be such that inventory at the time of ordering suffices to meet the needs of production during the procurement period. If the usage rate of materials and the lead time for procurement are known with certainty then the ordering level would simply be lead time in days for procurement, mult...