The literary meaning of the word inventory is stock of
Every enterprise needs inventory for smooth running
of its activities
It serves as a link between production and
The unforeseen fluctuations in demand and supply of
goods necessitate the need for inventory.
The investment in inventories constitutes the most
significant part of current assets in most of the
undertakings. Thus it is very essential to have proper
control and mgt of inventory.
The purpose of inventory mgt is to ensure availability of
materials in sufficient qty as and when required and also
minimise investment in inventories.
TYPES OF INVENTORIES
WORK IN PROGRESS
PURPOSE OF HOLDING INVENTORIES
Transaction motive: which facilitates continuous
production and timely execution of sales orders.
Precautionary motive: for meeting unpredictable
changes in demand and supply of materials
Speculative motive: for taking advantage of price
fluctuations , saving in re-ordering costs and qty
MAIN OBJECTIVES ARE AS FOLLOWS
To ensure continous supply of materials,spares
and finished goods.
To avoid both over-stocking and under-stocking
To maintain investments in inventroies at the
optimum level as required by the operational and
To keep material cost under control.
To minimise losses through
deterioration,pilferage,wasteages and damages.
Risk and cost associated with inventories
1. Price Decline
2. Product deterioration
TOOLS AND TECHNIQUES OF INVENTORY
Determination of stock levels.
Determination of safety stocks.
Determination of Economic Order Quantity.
Inventory turn over ratios.
Age schedule of inventories.
Just in time (JIT) inventory system