This document discusses various concepts related to inventory management. It defines inventory as stock of goods and explains that inventory includes raw materials, work in progress, and finished goods for a manufacturing company. It also discusses determining economic order quantity by balancing ordering and carrying costs. Other concepts covered include ABC analysis for inventory classification, just-in-time manufacturing, inventory turnover ratio, and stock keeping units. The overall purpose of inventory management is to avoid understocking or overstocking.

2. The dictionary meaning of Inventory is STOCK OF
GOODS.
The word inventory is understood differently by
various authors. In accounting it may mean stock of
finished goods only.
 In a manufacturing concern, it may include raw
materials, work in progress and stores, etc.
In Retail, the amount of stock present in a retail
outlet and ready to be distributed.

3. Inventory Management is a Science primarily about
specifying the shape and percentage of stocked
goods.
 A proper planning of purchasing, storing, and
accounting should form a part of inventory
management.
An efficient system of inventory management will
determine:
1)What to purchase

4. 2) How much to purchase
3)From where to purchase.
4)Where to Store.
The purpose of inventory management is to keep the
stock in such a way that neither there is over- stocking
nor under- stocking.

7. EOQ is a quantity of
inventory which can
reasonably be ordered
economically at time.
In determining this
point, ordering costs and
Carrying Costs are taken
into consideration.
Ordering costs are
basically the cost of
placing an order.

8. Carrying cost includes costs of storage facilities and
loss of value through physical deterioration, cost of
obsolescence.
The balancing point is known as Economic Order
Quantity.

9. Under this the inventory is classified into 3
categories viz. A B and C. These categories are based
upon the inventory value and cost significance .
Items of High value and small in no. are termed as
A.
Items of moderate value and moderate in no. are
termed as B.
Items of small value and large in no. are in category
C
It means Always Better Control

10. The cost of each item is multiplied by the no. used in a
given period and then these items are tabulated in
descending numeric value order.

11. In this, the items are classified on the basis of their
criticality to the production process or other services.
 In this classification of materials, V stands for Vital
items without which the production process would come
to standstill.
E denotes Essential items whose stock out would
adversely affect the efficiency of the production system.
Their non availability might cause temporary losses.
The D items are the Desirable items which are

12. Required but do not immediately cause a loss of
production.
The VED analysis is done mainly in respect of
spare parts.

13. It is a philosophy that focuses attention on
eliminating waste by purchasing or manufacturing just
enough of the right items just in time.
It is a Japanese management philosophy applied in
manufacturing which involves having the right items of
the right quality and quantity in the right place and at
the right time.
It involves having products arrive as soon as the
customers order them.

14. This ratio is computed by dividing the cost of goods
sold by the average inventory.
Stock Turnover Ratio= Cost of goods sold
Average inventory
It is way of measuring how many times a business
use inventory in a given time period.
Business use inventory turnover to assess
competitiveness, project profits , and generally figure
out how well they are doing in their industry.

15. Stores and Spares term which commonly covers all
kinds of supplies necessary to keep production
equipment operating.
The firm should keep each and every component of
stores and spares to a reasonable level.
Stores and Spares inventory turnover:
Annual Consumption of Stores and Spares
Stores and spares inventory

16. Every product at the store has a unique code. This
code helps in identification and tracking of the
products at the retail store.
The retailer feeds each and every SKU in the master
computer and can easily track the product in the
stock just by entering the SKU no.

17. It is a regular analysis of stock versus projected
future needs. This can be done through a manual
review of stock or by using inventory software.