This document discusses inventory control and recent trends in production planning and control (PPC). It defines inventory and different types of inventory classified based on material flow and nature of use. It also discusses the purpose of holding stock, inventory control including economic order quantity model, and inventory decision parameters for Q and P models. Recent trends covered include applications of computers in PPC, computerized PPC systems, just-in-time production, kanban production control, manufacturing resource planning (MRP II), enterprise resource planning (ERP) and its modules.
2. INVENTORY
Inventory is a stock of an item or ideal
resource held for future use.
INVENTORY DEFINED
The term inventory includes
1) raw material
2) In processed finished package
3) Other stocks
3. TYPES OF INVENTORY
CLASSIFICATION BASED ON MATERIAL
FLOW:
1. Raw material inventories
2. Brought out parts inventories
3. Work in process inventories
4. Finished goods inventories
5. MRO INVENTORIES (Maintenance, Repair,
Operation)
4. CLASSIFICATION BASED ON NATURE
OF USE:
1. Anticipation inventories (expected demand)
2. Fluctuation inventories ( Avoid risk)
3. Lot size inventories ( large lots to get discounts)
4. Transportation inventories (one place to another)
5. PURPOSE OF HOLDING STOCK
1. To maintain independence of operations
2. To meet variation in product demand
3. To allow flexibility in production scheduling
4. To provide safe guard of raw materials
5. To take advantages of price discounts
6. To utilize the advantage of price fluctuations
7. To prevent loss of orders
6. INVENTORY CONTROL
Scientific method for what to order, when to
order, how much to order, how much to stock.
INVENTORY DECISIONS:
1. HOW MUCH (order quantity)
2. WHEN TO REPLISH (order level)
FUNCTIONS OF INVENTORY CONTROL:
1. Effective running of the stores
2. Technology responsibilities
3. Stock control system
7. OBJECTIVE OF INVENTORY CONTROL
1. To ensure Continuous supply of materials.
2. To maintain overall investment
3. To minimize holding and replacement
shortage
4. To keep in active , waste at minimal level
5. To supply of product , raw materials
regurarly.
9. TERMS USED IN INVENTORY CONTROL
1. Demand
2. Order cycle
3. Lead time
4. Re order level
5. Safety or buffer stock
6. Re order quantity
10. ECONOMIC ORDER QUANTITY
Amount of quantity produced during one
production cycle is known as order quantity.
11. ASSUMPTIONS OF THE BASIC EOQ
FORMULA
Demand and lead time are known and constant
Purchase cost do not vary with ordered quantity
Ordering and carrying costs include relevant
costs
FORMULA:
12. TYPES OF INVENTORY SYSTEMS
TWO GENERAL TYPES OF INVENTORY
SYSTEMS.
FIXED ORDER QUANTITY MODEL (Q-model)
FIXED TIME PERIOD MODELS (P-model)
15. INVENTORY DECISION PARAMETERS
FOR Q- MODEL
1. Re- order quantity (how much to order)
2. Re –order level (when to order)
RE- ORDER LEVEL = SAFETY STOCK +
LEAD TIME CONSUMPTION
16. P-MODEL
In the fixed time p-model periodic system,
periodic review system.
17.
18. INVENTORY DECISION PARAMETER
FOR P- MODEL
1. Re- order level (when to order)
2. Re –order quantity (how much to order)
RE- ORDER QUANTITY = MAXIMUM STOCK --
STOCK ACTUALLY HELD AT
THE TIME OF REVIEW
20. EFFECT OF DEMAND ON INVENTORIES
STAGE-I- producing components from raw
materials
STAGE-II – producing minor components
from components
STAGE-III – producing major assemblies
from components
STAGE-IV – assembling the final product
21. VARIOUS INVENTORY CONTROL
TECHNIQUES
Various inventory control otherwise called as
selective inventory control.
selective inventory control refers to the
variation in method of control in item to item
on some selective basis
22. SELECTIVE INVENTORY CONTROL
TECHNIQUES
1. ABC ANALYSIS- Always , Better, Control analysis
2. VED ANALYSIS – Vital , Essential, Desirable analysis
3. HML ANALYSIS- High, Medium, Low analysis
4. FSN ANALYSIS- fast moving , Slow moving, Non
moving analysis
5. SOS ANALYSIS- Seasonal, Off-Seasonal analysis
6. GOLF ANALYSIS- Government, Ordinary, Local,
Foreign analysis
7. XYZ ANALYSIS
8. BAR CODE ANALYSIS
23. ABC ANALYSIS
Categorizing inventories according to quantity
and value
ABC analysis is based on the Pareto principle
24. PROCEDURE FOR ABC ANALYSIS
1. Identify all the items being used list them and
estimate the annual consumption
2. Collect cost data for individual items
3. Find out annual usage or consumption in
rupees
4. Arrange in descending order (annual usage)
5. Calculate cumulative annul usage express in
the percentage of total annual usage.
6. Plot cumultive usage percentage against
cumulative item percentage and segerate in to
A,B,C
25. RECENT TRENDS IN PPC
APPLICATIONS OF COMPUTERS IN PPC:
1. Plant logistics
2. Cost accounting
3. Estimation
4. Quality management
5. Simulation
6. Scheduling
7. Etc,.
26. COMPUTERISED PRODUCTION AND
PLANNING AND CONTROL
1. Product structure processer
2. Material requirement
3. Product costing system
4. Inventory management system
5. Master production scheduling system
6. Capacity planning system
7. Shop floor control and monitoring system
27. JUST IN TIME PRODUCTION SYSTEM
JIT is a management philosophy
Eliminate sources of manufacturing waste
Right part in the right place in the right time.
OTHER NAMES:
Short cycle manufacturing
Stockless production
Zero inventory manufacturing
28. OBJECTIVES OF JIT
1. Zero defects
2. Zero inventories
3. Zero setup time
4. Zero breakdowns
5. Zero handling
6. Zero lead time
7. Lot size
29. SEVEN WASTES OF JIT
1. Waste of over production
2. Waste of waiting
3. Waste of transportation
4. Waste of process itself
5. Waste of stock
6. Waste of motion
7. Waste of making defective products
32. KANBAN PRODUCTION CONTROL
SYSTEM
TWO MAIN TYPES OF KANBAN:
1. Production kanban (P-kanban)
It signals need to produce more parts
2. Transport kanban (T-kanban or move kanban)
It signals need to deliver more parts to the
next work centre
36. ENTERPRISE RESOURCE
PLANNING
ERP is a new system concept every enterprise
function is integrated with a flow of
information
ERP Vs MRP-II
ERP has a technical requirements such as graphical
user interface, database , fourth generation
language, etc,.
37. INFORMATIONS
REQUIREMENTS OF ERP
1. Sales customer order demand relation ship
2. Manufacturing resource data
3. Inventory status data
4. Manufacturing process information
5. Customer information
6. Customer satisfaction information
7. Vendor and supply chain detail data
39. IMPLEMENTATION OF ERP
1. Identify the needs of ERP implementation
packages
2. Evaluating the existing business situation
3. Make decisions on regarding situations
4. Re engineer business process to achieve desired
results
5. Evaluate the various available ERP packages
6. Choose suitable ERP package
7. Install
8. Finalise
40. MODULES OF ERP
1. Finance module
2. Manufacturing module
3. Distribution module
4. Service module
5. Transportation module
6. Process module
7. Project module
8. Tools module
9. Other modules