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Inventory Control


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Inventory Control

  1. 1. )
  2. 2. <ul><li>Inventory is the idle resource of an enterprise. </li></ul><ul><li>A certain amount of inventory is essential for smooth running of an organization. </li></ul><ul><li>Inventory control technique is used to strike a balance between operations and demand. </li></ul>
  3. 3. <ul><li>Raw material and spares </li></ul><ul><li>Work in process </li></ul><ul><li>Finished goods inventory </li></ul>
  4. 4. <ul><li>Total inventory cost = purchasing cost </li></ul><ul><li>+ </li></ul><ul><li>Set up cost </li></ul><ul><li>+ </li></ul><ul><li>Holding cost </li></ul><ul><li>+ </li></ul><ul><li>Shortage cost </li></ul>
  5. 5. <ul><li>Purchasing cost </li></ul><ul><li>Set up cost </li></ul><ul><li>Holding cost </li></ul><ul><li>Shortage cost </li></ul>
  6. 6. <ul><li>Holding (or carrying) costs. </li></ul><ul><ul><li>Costs for capital, taxes, insurance, etc. </li></ul></ul><ul><ul><li>(Dealing with storage and handling) </li></ul></ul><ul><li>Setup (or production change) costs. ( manufacturing ) </li></ul><ul><ul><li>Costs for arranging specific equipment setups, etc. </li></ul></ul><ul><li>Ordering costs ( services & manufacturing ) </li></ul><ul><ul><li>Costs of someone placing an order, etc. </li></ul></ul><ul><li>Shortage (backordering) costs. </li></ul><ul><ul><li>Costs of canceling an order, customer goodwill, etc. </li></ul></ul>
  7. 7. <ul><li>ABC (AFTER BETTER CONTROL) ANALYSIS </li></ul><ul><li>A-items are small in quantity but high in price. </li></ul><ul><li>B-moderate in quantity and moderate in price. </li></ul><ul><li>C-are required in high quantity but low price. </li></ul>
  8. 8. Class Item No. Percentage Value in Million Rupees Percentage A 136 4.2 3.12 73.7 B 531 16.8 0.92 21.8 C 2509 79.0 0.19 4.5 Total 100.0 4.23 100.0
  9. 9. <ul><li>HML </li></ul><ul><li>These items are listed out in the descending </li></ul><ul><li>order of unit- high, medium, low volume. </li></ul><ul><li>VED </li></ul><ul><li>It stands for vital, essential and desirable. It is </li></ul><ul><li>mostly done in spare parts. </li></ul><ul><li>GOLF </li></ul><ul><li>These items are imported which are channelized </li></ul><ul><li>through the state trading corporations. </li></ul>
  10. 10. <ul><li>FSN </li></ul><ul><li>The pattern of issue from store. Fast moving, </li></ul><ul><li>slow moving, near moving. </li></ul><ul><li>SDE </li></ul><ul><li>In this items are classified on the basis of scares </li></ul><ul><li>items ,difficult to get, easy to get the product. </li></ul>
  11. 11. <ul><li>EOQ (economic order quality) </li></ul><ul><li>Economic order quality deals when the cost of </li></ul><ul><li>procurement and handling of inventory are at </li></ul><ul><li>optimum level and total cost is minimum. </li></ul>
  13. 13. Annual Holding Cost A little bit of calculus… Total Annual Cost = Annual Purchase Cost Annual Ordering Cost + + TC = Total annual cost D = Demand C = Cost per unit Q = Order quantity S = Cost of placing an order or setup cost H = Annual holding and storage cost per unit of inventory