3. Contents
1.1.Definition of inventory controlDefinition of inventory control
2.2.Specification of inventory controlSpecification of inventory control
3.3.Inventory costsInventory costs
4.4.Purchasing procedurePurchasing procedure
5.5.Inventory planning and controlInventory planning and control
6.6.Economic order quantity(EOQ)Economic order quantity(EOQ)
7.7.Just in time inventory systemJust in time inventory system
4. Inventory control-
Inventory control- supervision of supply, storage
and accessibility of items in order to insure an
adequate supply without excessive oversupply.
Inventory control is one of the greatest factors in aInventory control is one of the greatest factors in a
company’s success or failure. This part of thecompany’s success or failure. This part of the
supply chain has a great impact on the company’ssupply chain has a great impact on the company’s
ability to manufacture goods for sale or to deliverability to manufacture goods for sale or to deliver
customer satisfaction on orders of finishedcustomer satisfaction on orders of finished
products.products.
5. SpecificationsSpecifications
( Maximum Limits)( Maximum Limits)
•• Parts Virtually Unlimited*Parts Virtually Unlimited*
•• Substitutes per part 5Substitutes per part 5
•• Costing methods 4Costing methods 4
•• Price levels 25Price levels 25
•• Quantity price break levels 5Quantity price break levels 5
•• Product categories 5Product categories 5
•• Quantity per part 9,999,999Quantity per part 9,999,999
•• Cost per part $9,999,999.99Cost per part $9,999,999.99
•• Price per part $9,999,999.99Price per part $9,999,999.99
•• Decimal places in part quantitiesDecimal places in part quantities
33
•• Decimal places for costs 4Decimal places for costs 4
•• Decimal places for prices 4Decimal places for prices 4
•• Product lines Unlimited*Product lines Unlimited*
•• Warehouses 99Warehouses 99
•• Months to keep history 60Months to keep history 60
•• Characters in serial number 26Characters in serial number 26
•• Serial numbers per part 5000Serial numbers per part 5000
••Characters in transactionCharacters in transaction
description 20description 20
•• Characters in bin location 10Characters in bin location 10
•• Characters in part ID 20Characters in part ID 20
6. Inventory Cost
OrderingOrdering
CostCost
CarryingCarrying
CostCost
StockoStocko
ut costsut costs
1.Developing1.Developing
and sendingand sending
purchasepurchase
ordersorders
2. Inventory2. Inventory
inquiriesinquiries
1. Cost of1. Cost of
capitalcapital
2. Taxes2. Taxes
3. Insurance3. Insurance
4. Spoilages4. Spoilages
1.lost1.lost
salessales
2.ample2.ample
safetysafety
stockstock
Annual
Cost
Order QuantityQa
Total Cost Curve
Carrying (holding)
Cost Curve
Ordering (set-up)
Cost Curve
Fig: Costs as Functions of Order
Quantity
7. Purchasing Procedure
Procedure 1Procedure 1 -- Purchasing from commercial vendorsPurchasing from commercial vendors
Procedure 2Procedure 2 -- Receiving purchased itemsReceiving purchased items
Procedure 3Procedure 3 -- Making emergency purchasesMaking emergency purchases
Procedure 4Procedure 4 -- Using blanket purchase ordersUsing blanket purchase orders
Procedure 5Procedure 5 -- Fixed asset system inventoryFixed asset system inventory
Procedure 6Procedure 6 -- Purchasing from the universityPurchasing from the university
bookstorebookstore
Procedure 7Procedure 7 -- For borrowing computer equipmentFor borrowing computer equipment
Procedure 8Procedure 8--PaymentPayment for contracted servicesfor contracted services
performedperformed
8. FeedbackFeedback
MeasurementsMeasurements
To Revise PlansTo Revise Plans
And ForecastsAnd Forecasts
FeedbackFeedback
MeasurementsMeasurements
To Revise PlansTo Revise Plans
And ForecastsAnd Forecasts
Planning onPlanning on
What InventoryWhat Inventory
To Stock andTo Stock and
HowHow
to Acquire Itto Acquire It
Planning onPlanning on
What InventoryWhat Inventory
To Stock andTo Stock and
HowHow
to Acquire Itto Acquire It
ForecastingForecasting
Parts/Parts/
ProductProduct
DemandDemand
ForecastingForecasting
Parts/Parts/
ProductProduct
DemandDemand
ControllingControlling
InventoryInventory
LevelsLevels
ControllingControlling
InventoryInventory
LevelsLevels
9. 1. Demand is known and constant
2. Lead time is known and constant
3. Receipt of inventory is instantaneous
4. Quantity discounts are not possible
5. The only variable costs are the cost of
setting up or placing an order, and the
cost of holding or storing inventory
over time
6. Stockouts can be completely avoided if
orders are placed at the appropriate
time
The basic Economic Order Quantity
(EOQ) formula is as follows:
10. Just-in-time inventory system
Just-in-time (JIT) is an inventory strategy that strives to improve a
business's return on investment by reducing in-process inventory
and associated carrying costs. Just In Time production method is
also called the Toyota Production System.
Benefits:
Employees with multiple skills are used more efficiently.
Having employees trained to work on different parts of the
process allows companies to move workers where they are
needed.
Production scheduling and work hour consistency synchronized
with demand. If there is no demand for a product at the time, it
is not made. This saves the company money, either by not
having to pay workers overtime or by having them focus on
other work or participate in training
