Inventory management

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Inventory management

  1. 1. INVENTORY MANAGEMENT 1/25/20131 Rahul Sunda 110629
  2. 2. CONTENTS:- 1.INTRODUCTION 2.OBJECTIVE 1/25/2013 3.IMPORTANT TERM USED IN INV.MNG. 4.PRESSURE FOR LOW &HIGH INVENTORY 5.TWO FORMS OF DEMAND 6.TYPES OF INVENTORY 7.CHALLANGES IN I.M. 8.TECTICS USED TO CONTROL INVENTORY 9.EOQ ANALYSIS 10.ABC ANALYSIS 11.INVENTORY CONTROL SYSTEM 12.P&Q SYSTEMS 2
  3. 3. 1/25/2013 INVENTORY Inventory is anything which can be store for future needs or demand, it can be in any form like man, machine, raw material, machine hours , finished goods etc.3
  4. 4. INVENTORY MANAGEMENT 1/25/2013 Inventory management, is the planning and controlling of inventories in order to meet the competitive priorities of the organization, is an important concern for managers in all types of businesses. 4
  5. 5. INTRODUCTION CONTINUED 1/25/2013 Inventory control is concerned with achieving an optimum balance between two competing objectives.1) Minimizing the investment in inventory.2) Maximizing the service levels to customer’s and it’s operating departments. 5
  6. 6. INVENTORY ACT AS A CUSHION 1/25/2013If Operation has full of problem , like labourabsenteeism is high worker’s moral is also low ,equipment working is not so good , logistic systemis not so good , than also if a company has veryexcess amount of inventory , then no-one knowsabout these problem. 6
  7. 7. OBJECTIVES The specific objectives of inventory management are as follow: 1/25/2013a) Keeping the production on as on-going basis.b) Preventing idleness of men, machine .c) Utilizing of scare resources (capital) and investment judiciously.d) Avoiding risk of loss of life (moral & social).e) Giving satisfaction to customers in terms of quality- care, competitive price and prompt delivery.f) Inducing confidence in customers and to create trust and faith. 7
  8. 8. IMPORTANT TERM USED IN I.M. 1/25/2013 Lot Size:- The quantity of an inventory item management either buys from a supplier or manufactures using internal processes SKU:- An individual item or product that has an identifying code and is held in inventory somewhere along the supply chain. Reorder Point:-it is that point where new order is placed & it is dependent on lead time 8
  9. 9. PRESSURE FOR INVENTORY 1/25/2013 A Manager consistently dealing with low and high inventory according to the nature of product, customer demand, supplier efficiency , lead time. 9
  10. 10. PRESSURE FOR LOW INVENTORY 1/25/2013  Cost of Capital:- (a) Opportunity cost (b) Total Holding Cost  Taxes  Insurance  Shrinkage  Storage 10
  11. 11. PRESSURE FOR HIGH INVENTORY 1/25/2013 Customer Side Set up cost Ordering Cost Labour/equipment utilization Transportation Cost Payment to Suppliers 11
  12. 12. TWO FORMS OF DEMAND Dependent  Demand for items used to produce final products and that is influence by other item. 1/25/2013  Tires stored at a plant are an example of a dependent demand item. Independent  Demand for items used by external Customers , that don’t influence by other Item. EX. Cars, appliances, computers, and houses are examples of independent demand inventory. 12
  13. 13. DEMAND CONTINUED Independent Demand 1/25/2013 A Dependent Demand B C D E D F Independent demand is uncertain. 13 Dependent demand is certain.
  14. 14. TYPES OF INVENTORY 1/25/2013 By using the concept of what is order size and what is time between the order or lot size , Inventory are of 4 types:- Cycle Inventory Anticipation Inventory Safety Inventory Pipe Line Inventory 14
  15. 15. CYCLE INVENTORY Cycle inventory related with concept of LOT size , it is that portion of inventory which varies directly with LOT size. 1/25/2013 So it directly depends on cycle time or LEAD time(time between two orders) Average cycle inventory(when demand rate is constant)=q+0/2=q/2 15
  16. 16. CYCLE CURVE Profile of Inventory Level Over Time Q 1/25/2013 Deman d rateQuantityon handReorderpoint Time Receive Place Receive Place Receive order order order order order Lead time 16
  17. 17. SAFETY STOCK INVENTORY 1/25/2013 Surplus Inventory that protects against uncertainties in demand , lead time ,and supply changes. It also avoid customer service problems and in the emergency situation. It achieve through two ways:- 1.before lead time order is placed. 2.more order is placed. 17
  18. 18. ANTICIPATION INVENTORY 1/25/2013It is that part of Inventory which is held for meet inpeak season demand , so this type of Inventory isintensely created because a certainty is there that itwill consume in peak season.It also help when suppliers are threatened with a strikeor have severe capacity limitations. 18
  19. 19. PIPE LINE INVENTORY 1/25/2013 Inventory that is created when an order for an item is issued but not yet placed in inventory. It exists in the form of materials that move from supplier to a plant , from one operation to the next in the plant ,or plant to a customer, or from the distribution centre to a retailers. Longer lead time or higher demand at a frequent time create more pipe line inventory. pipe line inventory=d.L 19
  20. 20. CHALLENGES IN I.M. 1/25/2013 What is in the Stock ? What quantity of a single product is available? Where it is being held ? So big retail chain stores like Walmart (U.S.A.) ,Tesco (U.K.), Carrefour(France) used RFIS System. 20
  21. 21. 1/25/2013 21

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