Inventory management final


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This is short presentation which tries to explain the inventory management in Financial Management by taking Tata Steel as an example. This presentation was prepared along with Shashank M.A, Gautam Raj, Prasad E. Prabhu & Abhishek Bose (MSRIM Bangalore)

Aniruddh Tiwari
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  • JIT reduces in-process inventory and associated carrying costs. It is also called the Toyota Production SystemABC Analyses is done based on Cost of item x No. Of items consumed/issued
  • Inventory management final

    1. 1. Inventory Management Of
    2. 2. Inventory Management Of Steel
    3. 3. Inventory Management Of Group 3 PGDBM- II Sem Section ‘A’Abhishek Bose Anirudh TiwariGautam Raj Prasad E. Prabhu SteelShashank M.A.
    4. 4. Introduction Inventory consists of  Raw materials  Work in progress  Finished goods  Inventory in transit Benefits of holding inventory a) Benefits in production b) Benefits in purchase c) Benefits in sales
    5. 5. Objectives of inventory management To provide adequate inventory for the firm’s requirement in the process of work To minimize firm’s investment in inventory To ensure smooth flow of materials in production & sales operations
    6. 6. Costs & Benefits of Inventory
    7. 7. Methods of Inventory Management  Economic Order Quantity
    8. 8. Assumptions in EOQ method The firm can forecast accurately its annual requirement Usage of inventory is steady There is no time gap between ordering & the supply of inventory Only two types of costs are considered: ordering cost & inventory carrying cost Both costs are constant for the given inventory level
    9. 9. Calculation of EOQTC = P*D + (D*S)/Q + (H*Q)/2Q = √(2*D*S)/Hwhere,TC = total costP = purchase cost per unitD = annual demand of the raw materialS = fixed cost per orderH = annual holding cost
    10. 10. Limitationsa) Accurate forecast of annual requirement difficult.b) No time gap between ordering & supplying of raw materials assumed, which may not be the case.c) Demand for a product may not be uniform throughout the year.d) EOQ of manufacturing firm may not be economical for the supplier.e) Better discounts may be offered by the supplier for placing orders higher than EOQ.
    11. 11. Other methods of Inventory Management Just In Time (JIT) ABC analysis High, Medium, Low (HML) classifications Vital, Essential, Desirable (VED) Classifications Scarce, Difficulty, Easy (SDE) Classifications Fast moving, Slow moving, Non moving (FSN) Analysis Seasonal & Off Seasonal (SOS) Analysis XYZ Analysis Government, Open market, Local & Foreign source (GOLF) Analysis
    12. 12. Inventory Management of Tata Steel Amount : Rs. In Lakhs
    13. 13. Graph Showing Consumption & Stock of Raw Materials Amount : Rs. In Lakhs
    14. 14. Work In Progress (WIP)
    15. 15.  Product line of TATA STEEL includes long tubes,semis,hot rods, cold rods and galvanized tubes. Tubes division uses Just –In-Time purchase system . A look at the chart indicates though in the last four years sales has remained same or decreased , the stock of raw material has increased. This is due to the fact that price of raw material has increased but company is not able to increase the price due to stiff competition. Increase in inventory may also be due to wrong estimation of orders. The chart of WIP shows that both cost of goods produced and WIP have increased during the period. work in progress holding period also has gone up which the company must look into.
    16. 16. THANK YOU