A certain amount of inventory is essential for smooth running of an organization.
Inventory control technique is used to strike a balance between operations and demand.
Raw material and spares
Work in process
Finished goods inventory
Total inventory cost = purchasing cost
Set up cost
Set up cost
Holding (or carrying) costs.
Costs for capital, taxes, insurance, etc.
(Dealing with storage and handling)
Setup (or production change) costs. ( manufacturing )
Costs for arranging specific equipment setups, etc.
Ordering costs ( services & manufacturing )
Costs of someone placing an order, etc.
Shortage (backordering) costs.
Costs of canceling an order, customer goodwill, etc.
ABC (AFTER BETTER CONTROL) ANALYSIS
A-items are small in quantity but high in price.
B-moderate in quantity and moderate in price.
C-are required in high quantity but low price.
Class Item No. Percentage Value in Million Rupees Percentage A 136 4.2 3.12 73.7 B 531 16.8 0.92 21.8 C 2509 79.0 0.19 4.5 Total 100.0 4.23 100.0
These items are listed out in the descending
order of unit- high, medium, low volume.
It stands for vital, essential and desirable. It is
mostly done in spare parts.
These items are imported which are channelized
through the state trading corporations.
The pattern of issue from store. Fast moving,
slow moving, near moving.
In this items are classified on the basis of scares
items ,difficult to get, easy to get the product.
EOQ (economic order quality)
Economic order quality deals when the cost of
procurement and handling of inventory are at
optimum level and total cost is minimum.
QUALITY COST INVENTORY
Annual Holding Cost A little bit of calculus… Total Annual Cost = Annual Purchase Cost Annual Ordering Cost + + TC = Total annual cost D = Demand C = Cost per unit Q = Order quantity S = Cost of placing an order or setup cost H = Annual holding and storage cost per unit of inventory