Inventory management

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Inventory Management What is Inventory Management?

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inventory management

nishant singh

Chapter 5 - Business Arithmetic . ABC analysis The inventory control technique known as ABC analysis builds on Pareto's Principle. In ABC analysis, a company reviews its inventory and sorts all SKUs into three categories, called "A" , "B" and "C" items. The typical breakdown might look like this: "A" inventory: 20 percent of SKUs, 80 percent of value. "B" inventory: 30 percent of SKUs, 15 percent of value. "C" inventory: 50 percent of SKUs, 5 percent of value. Pareto's Principle and ABC analysis for control Whether or not you're familiar with the economic principle known as Pareto's Principle , you may have observed its effects. This principle holds that in a given system, a relative handful of "causes" will produce the majority of "effects." For example, one may find that 20 percent of customers are responsible for 80 percent of sales, or that 30 percent of the product lines result in 70 percent of returns. The principle is named for Vilfredo Pareto, an Italian economist who studied land ownership in Italy in the early 1900‘s and found that roughly 20 percent of the population held title to about 80 percent of the land. Legend has it that he further developed the theory upon observing that 20 percent of the pea pods in his garden produced 80 percent of the peas. For this reason, Pareto's Principle is often referred to as the "80/20" rule.

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There are numerous techniques of Inventory Control. A few of them are: 1. Setting Stock Level: The purpose behind setting of different stock levels is to ensure smooth operation of the enterprise. 2. ABC Analysis: A.B.C. (Always Better Control) method is dividing inventory into three categories: A, B, and C, based on annual consumption unit, inventory value, and cost significance. 3.Inventory Turnover Ratios: The ratio indicates how quickly the inventory is used for production. Higher the ratio, shorter will be the duration of inventory at the factory. 4.Economic Order Quantity : The most economic buying quantity or the optimum quantity is determined . Factors determining E.O.Q : a) Ordering Cost per order b) Carrying Cost per unit p.a. c) Annual Consumption

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The counting job is the activity that helps count items that have already been made. An inventory count is a snapshot of the current inventory levels. As soon as you have taken inventory and specified the quantity on hand, the difference between the quantity counted and the snapshot of on-hand inventory is posted as a loss or gain for the item. The journal of inventory counts shows the on-hand quantity counted compared to the inventory levels. Each count is given a journal number and date. This lets you view data from earlier counts, specifically which counting journal and voucher the count was posted to, and the date of the count.

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Cost planning and control are vital links in any organization. Activities, Cost Planning and Control presentation covers topics like intermediate ratio in transportation, warehouse facility, inventory and external and internal environment factors. Other topics related to Cost Planning and Control are also discussed in this presentation by Welingkar’s Distance Learning Division. For more such innovative content on management studies, join WeSchool PGDM-DLP Program: http://bit.ly/DistMang Join us on Facebook: http://www.facebook.com/welearnindia Follow us on Twitter: https://twitter.com/WeLearnIndia Read our latest blog at: http://welearnindia.wordpress.com Subscribe to our Slideshare Channel: http://www.slideshare.net/welingkarDLP

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McGraw-Hill/Irwin Copyright © 2011 The McGraw-Hill Companies, All Rights Reserved Chapter 16 Sales and Operations Planning 16-* Learning Objectives Understand what sales and operations planning is and how it coordinates manufacturing, logistics, service, and marketing plans. Construct aggregate plans that employ different strategies for meeting demand. Describe what yield management is and why it is an important strategy for leveling demand. 16-* What is Sales and Operations Planning?Sales and operations planning is a process that helps firms provide better customer service, lower inventory, shorten customer lead times, stabilize production rates, and give top management a handle on the businessThe process consists of a series of meetings, finishing with a high-level meeting where key intermediate-term decisions are madeThis must occur at an aggregate level and also at the detailed individual product level By aggregate we mean at the level of major groups of products LO 1 16-* Types of PlanningLong-range planning: planning focusing on a horizon greater than one year Generally is done annuallyIntermediate-range planning: planning focusing on a period from 3 to 18 months Time increments that are weekly, monthly, or quarterlyShort-range planning: planning covering a period from one day to six months Daily or weekly time increments LO 1 16-* The Aggregate Operations PlanSpecify the optimal combination of Production rate (units completed per unit of time) Workforce level (number of workers) Inventory on hand (inventory carried from previous period)Product group or broad category (aggregation)This planning is done over an intermediate-range planning period of 3 to18 months LO 1 6 6 16-* Production Planning Strategies Chase strategy Match the production rate by hiring and laying off employees Must have a pool of easily trained applicants to draw on Stable workforce—variable work hours Vary the number of hours worked through flexible work schedules or overtime Level strategy Demand changes are absorbed by fluctuating inventory levels, order backlogs, and lost sales LO 1 10 10 16-* Production Planning Strategies ContinuedPure strategy: when just one of these approaches is used to absorb demand fluctuationsMixed strategy: when two or more of the approaches are usedIn addition to these strategies, managers also may choose to subcontract some portion of production Similar to the chase strategy, but hiring and laying off are translated into subcontracting LO 1 16-* Relevant Costs Basic production costs The fixed and variable costs incurred in producing a given product type in a given time period Costs associated with changes in the production rate Hiring, training, and laying off personnel Inventory holding costs Backorder costs LO 1 16-* Level SchedulingA level schedule holds production constant over a period of timeIt is something of a combination of the strategies we have mentioned hereFor each period, ...

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