Three inventory models

- When do you place an order for more inventory, and for how much? Running out of inventory can cost lost sales, but ordering too early or too much increases your cost to keep the extra inventory. Fortunately, there are three inventory models to help you with these decisions. Each model has a different purpose and manages a different attribute to control inventory levels. Let's look at how these models are used. First, there is the fixed-quantity model. Used by many factories to manage the arrival of materials. As the name suggests, each time you place an order, it's for the same amount. With this model, inventory is controlled by a reorder point, which is based on how much inventory you have on hand. Once your inventory reaches a specific level, you place a new order. Again, you order the same amount each time. The reorder point is set so that your factory does not run out of material and does not hold unneeded…