logistics inventory-management

1. Logistics Management
(Part of ORL)
BBA (Semester 4)
Faculty : Ravi Kumar Singh, International School of management Patna
Lecture-13 : Inventory Management

2. Lecture-13 : Inventory Management
Topics to be discussed-
● Meaning of Inventory
● Classification of Inventory
● Inventory costs
● Inventory Control matrix
ISM Patna/Logistics_1_Ravi_K_Singh

3. Meaning and Definition on Inventory
An inventory means any idle material or
resource of an enterprise awaiting future sales,
future use or transformation.

4. Classification of Inventory
Classification of Inventory
As per Nature of Materials
Finished Goods
Inventory
WIP Inventory
MRO Inventory
Production Inventory
As per Uses of Materials
Precautionary
Inventory
Speculative Inventory
Transaction Inventory
As per Function
Safety Stock
Working Stock
De-coupling Stock
Psychic Stock
Pipeline Stock
Anticipation Stock

5. Inventory Costs
1. Procurement Cost
2. Inventory Carrying Cost
3. Stock-Out Cost

6. Inventory Costs (Cont…)
1. Procurement cost-
○ Item Cost
○ Order processing cost
○ Transportation Cost
○ Transit Insurance Cost
○ Cost on Postage/ telephone/ fax/ mail
○ Cost of manpower involved in order generation, record keeping, material
handling, material checking etc.

7. Inventory Costs (Cont…)
2. Inventory Carrying (Holding) Cost:
○ Cost of working capital
○ Warehouse charges (Rent, Taxes, manpower, Electricity, safety devices etc)
○ Insurance charges
○ Cost of Damages (breakage, pilferage etc)
○ Cost of depreciation
○ Stock audit cost

8. Inventory Costs (Cont…)
3. Stock Out Cost
○ Loss of opportunity
○ Operation line stoppage cost
○ Customer dissatisfaction
○ Loss of goodwill
○ Extra cost due to urgency

9. Inventory Control Matrix