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Inventory management,[object Object],BY-  ABHISHEK GOYAL,[object Object]
INTRODUCTION,[object Object],Inventory is material that the firm obtains in advance of need, holds until it is needed, and then used, consumes, incorporates into a product, sells, or otherwise disposes it of. A business inventory is temporary in nature.,[object Object],Inventories are stock of any kind like fuel and lubricants, spare parts and semi-processed materials to be stored for future use mainly in the process of production or it can be known as the ideal resource of any kind having some economic values. ,[object Object]
Inventory valuation involves two process,[object Object],[object Object]
 Assignment of the values of theunits items of inventory,[object Object]
Forms of inventories,[object Object],There are many types of inventory. The form of inventories depends upon the type of concern. All types of inventory do not require same treatment and therefore policy with regard to each may also differ.,[object Object]
Raw material inventories:,[object Object],There are raw materials and other supplies, parts and components, which enter into the product during the production process and generally form part of the product.,[object Object],Work in process inventories:,[object Object],These are semi finished, work in progress and partly finished products formed at the various stages of production.,[object Object]
m.r.oinventories/ Spare part inventories:,[object Object],Maintenance, repairs and operating supplies which are consumed during the production process and generally do not form part of the product itself are referred to as spare part inventories.,[object Object],Finished inventories:,[object Object],These are complete finished products ready for sales. In a manufacturing unit, they are the,[object Object],final output of the production process. ,[object Object],They can also be classified as:-,[object Object],[object Object]
Lot size inventories
Anticipation inventories
Fluctuation inventories,[object Object]
Classification of inventories cost:,[object Object],Inventories’ cost are traditionally categorized into four basic types:,[object Object]
Purchase cost:,[object Object],For items that are purchased from outside the firms, this is usually the unit price that the firm pays to its vendor. As an item moves through the logistics system of the firms, it purchase cost in the inventory analysis should reflect its fully landed cost, by which is meant the cost to acquire and moves the item to that point in the system.,[object Object],Ordering cost:,[object Object],In addition to the per unit purchase cost, there is usually an additional cost which is incurred whenever we order, reorder or replenish the inventory. If we produce items internally then there will be an organization set up cost. This happens because we have to shut down the manufacturing line and change over, reconfigure the line to make a specific item. ,[object Object],This is the cost involved with processing the order, involving paying the bill, auditing, and so forth.  ,[object Object]
Holding cost:,[object Object],The cost that accrue due to the actual holding of the inventory over a time period. Many different kinds of cost can be considered as holding cost. The key characteristics of holding cost varies with the amount of inventory being held and the time that the inventory is held. The holding cost can further be classified as follows:,[object Object],[object Object]
 Service cost
 Risk cost
Capital cost.Shortage cost:,[object Object],When a demand arises which cannot be satisfied from available inventory an inventory shortage occurs. Purchase, ordering and holding cost can be thought of as the cost of having inventories, while shortage cost result for not having inventory, or for not having enough inventory at the right place at the right time  ,[object Object]

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Inventory management