It is an advanced presentation of inventory control,i hope that you benefit

1. Prepared By:
Khalid Waleed Mohamed Osama
Abdel Rahman Fawzy Osama Gamal
Port Said University
Faculty of Engineering
Production Engineering and Mechanical design
4th Year
Ahmed jihad Yasmeen ahmed

2. Presented By
Ahmed Jihad

3. What is Inventory
Control?
It is a system that enable the
business to control the
inventory of items.
It is the goods and materials
that a business holds for the
ultimate goals to have a
purpose of resale
Inventory is both an input and
output of the production
process. Inventory can be in the
form of raw materials, semi-
finished, and finished products.

5. Importance of
Inventory Control
Inventory control serves
several important functions
and adds a great deal of
flexibility to the operation of a
firm.

6. Types Of Inventory

7. Raw Materials
Purchased but not processed
Work-In-Process
Undergone some change but not completed a function of cycle time for a product
Work-In- Maintenance/Repair/Operating
(MRO) Process.
Necessary to keep machinery and processes productive
Finished Goods
Completed product awaiting shipment

9. Five main uses of
Inventory
are as follows:

10. Irregular
Supply and
Demand
Storing
Resources
Decoupling
Function
Quantity
Discounts
Avoiding Stocks
and Shortages

11. Inventory Control
Decisions
Even though there are literally millions of
different types of products manufactured
in our society, there are only two fundamental
decisions that you have to make when
controlling inventory.
How Much to Order ?
When to Order ?

12. Components
Of Total Cost

13. Cost of items
Cost of ordering
Cost of carrying or holding
inventory
Cost of stockouts
Cost of safety stock

14. Holding costs : the costs of holding or “carrying” inventory over time.
Ordering costs : the costs of placing an order and receiving goods.
Setup : cost to prepare a machine or process for manufacturing
costs an order.

15. Inventory Models
Economic
order quantity
(EOQ)
Production
order quantity
(POQ)
Quantity Discounts
(QD)

16. EOQ
Assumptions
Demand:
is known and
constant
Lead time
Is the time between
the placement of order
and the receipt of the
order

17. Inventory Usage
Over Time

18. Total Cost as a Function
of Order Quantity

19. EOQ MODEL
Q
Q*
D
S
Number of Units in each Order
Optimal Number of Pieces per
Order
Setup or Ordering Cost per
Order
Annual Demand in Units for the
Inventory Item
1
2
3
4

20. Holding or Carrying Cost
per Unit per Year
Annual Carrying Cost as a
Percentage of the Unit Cost
of the Item
5
6
7
8
Purchase Cost per Unit of
the Inventory Item
H = I x P
H
P
I

25. Let us now apply these formulas to the case of SBC, a
company that buys alarm clocks from a manufacturer
and distributes to retailers. SBC would like to reduce its
inventory cost by determining the optimal number of
alarm clocks to obtain per order. The annual demand is
1,000 units, the ordering cost is $10 per order, and the
carrying cost is $0.50 per unit per year. Each alarm
clock has a purchase cost of $5. How many clocks
should SBC order each time? As factory working 250
day per year production rate P = $5

26. Q=40000

31. Graph
Q*
200
100

32. Minimizing Cost

33. Example 2:

36. Economic Batch Quantity (EBQ),
also known as the optimum
production quantity (EPQ), is the
order size of a batch production that
minimizes the total cost.

37. POQ

38. Q*

39. Q*
Q*

40. Q*
Q*

41. Q*

42. Example:
(Q*)
Q*

43. Q*
Q*
Q*
Q*
Q*

44. Q*
Q*
Q*
Q*

45. Q*
26
4874
136

46. Reorder Point (ROP)
• EOQ answers the “how much” question
• The reorder point (ROP) tells “when” to order

48. Reorder Example

50. Quantity
Discount

51. To increase sales, many companies
offer quantity discounts to their
customers. a quantity discount is
simply a decreased unit cost for an
item when it is purchased in larger
quantities. It is not uncommon to
have a discount schedule with
several discounts for large orders.
See example below:

52. QD Model

53. QD Example

56. Total cost = Total Product cost + Total purchase cost Total holding cost+

58. Diagram

59. Any questions?