Process of inventory
management & control
Scientific method of finding out how much stock
should be maintained in order to meet the production
demands and be able to provide right type of material
at right time, in right quantities and at competitive
Inventory is actually money, which is available in
the shape of materials (raw materials, in-process and
finished products), equipment, storage space, worktime etc.
What is process of inventory management
& control ?
It refers to planning for optimum quantities
of material at all stages in the production
cycle and evolving techniques which would
ensure the availability of planned
Four steps are involved in the process Determination of optimum inventory levels and
procedures of their review and adjustment.
Determination of the degree of control that is
required for the best result.
Planning and design of the inventory control
Planning of the inventory control organization.
Determination of optimum inventory
levelsToo much of inventory results in locking of working
capital accompanied by increased carrying cost (but
reduce ordering cost)
Too less of inventory releases working capital for
alternative uses and reduce carrying cost and increase
ordering cost. But there is the risk of stock out costs.
So, the actual level of inventory improve your production
and reduce losses.
For that, inventory manage management plan for the
review of the stock.
Determination of degree of controlThe second aspect of inventory management is to decide
just how much control is needed to realize the objectives of
So that the ABC classification is there- this approach is
useful in deciding the degree of control.
`A` class items are `High` in value but `low` in quantity.
`C` class inventories are the opposite of `A` group, it is
`High` in quantity and `low` in value.
`B` group stock which are more or less equal in quantity
value proportion to the total inventory.
so inventory management decide the class of production on
the basic of requirement.
Planning and design of the inventory
styleAn inventory system provides the organisational structure
and the operating policies for maintaining and controlling
goods to be inventoried. The system is responsible for
ordering and receipt of goods, timing the order replacement
and keeping track of what has been ordered, how much, and
There two general approaches to inventory system –
(a)The fixed order quantity system
(b)The fixed order periodic system
(Variously know as periodic system, the periodic review
system, and fixed order interval system.)
PGDM 1st yr ,2nd sem
Roll No.- 4010
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