Inventory control involves maintaining stock levels using reorder rules. The objectives are to serve customers effectively, use capital efficiently, and allow for continuous production. Costs include setup, ordering, carrying, shortage, and salvage. Inventory is classified by function or nature. Analysis methods include ABC, HML, VED, FSN, SDE, XYZ, GOLF, and SOS. Economic order quantity aims to minimize total ordering and carrying costs by determining the optimal order size.

1. INTRODUCTION
 Inventory means all the
materials, parts, supplies, equipments, tools
and in process or finished products, recorded
and kept in organization for some period
time.
 Inventories are piles of raw materials and
finished goods in warehouse.
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2. DEFINITION OF INVENTORY CONTROL
 Inventory control is a system of ordering
based on the maintenance of stock in a store
using a re-order rule based on stock levels.
 Inventory control is concerned with various
items stocked at pre-determined level or
within some safety limits.
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3. OBJECTIVE OF INVENTORY CONTROL
 Service to customer.
 Effective use of capital.
 Economy in purchasing.
 Continuity of productive operation.
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4. COSTS ASSOCIATED WITH INVENTORIES
 Set up cost
 Ordering cost
 Purchase cost
 Carrying cost
 Shortage cost
 Salvage cost
 Revenue cost
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5. CLASSIFICATION
 Classification of inventory according to
functions is as follows,
1. Transit Inventories.
2. Cycle Inventories.
3. Buffer Inventories.
4. Decoupling Inventories.
5. Inventory as per the nature of items
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6. TYPES OF INVENTORY ANALYSIS.
 Different organizations follow different inventory
analysis or inventory control system. Some of them
are:
1. ABC
2. HML
3. VED
4. FSN.
5. SDE
6. XYZ
7. GOLF
8. SOS
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7. ABC ANALYSIS
 It is based on the concept, “Thick on the best
and Thin on the Rest.”
 The ABC approach is a means of
categorizing inventory items into three
classes „A‟ , „B‟ and „C‟, according to the
potential amount to be controlled.
 It is one of the widely used techniques of
inventory control.
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8. HML ANALYSIS
 The HML classification follows the same
procedure as is adopted in ABC
classification.
H = HIGH;
 M = MEDIUM;
 L = LOW.
 Only difference is that in HML, the
classification unit value is the criterion and
not the annual consumption value.
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9. VED ANALYSIS
 VED Classification
 V= Vital;
 E= Essential;
 D= Desirable.
• If a part is vital it is given „V‟ classification, if it is
essential, then it is given „E‟ classification and if it is
not so essential, the part is given „D‟ classification.
• For „V‟ items, a large stock of inventory is generally
maintained, while for „D‟ items, minimum stock is
enough.
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10. FSN ANALYSIS
 Here, classification is based on the pattern of
issues from stores and is useful in controlling
obsolescence.
 F = Fast moving
 S = Slow Moving;
 N = Non Moving.
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11. SDE ANALYSIS
 This method is used to those items which are
scarce in availability.
• S = Scarce
• D = Difficult
• E = Easily
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12. XYZ ANALYSIS
 It is based on closing inventory of different
items.
• X = Items with High Investment
• Y = Items whose value is nor too high nor
low
• Z = Items with Low Investment
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13. GOLF ANALYSIS
 Items categorized based on the source of
supply
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14. SOS ANALYSIS
 Seasonal, Off seasonal items.
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15. CONCEPT OF ECONOMIC ORDER QUANTITY
EOQ is the size of order which minimizes
total cost of carrying inventories and cost of
ordering.
 EOQ is the fixed quantity of materials for
which the order is to be placed each time.
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16. GRAPH OF EOQ
.
Total
Annual Costs Cost
Carrying Cost
Ordering Cost
Quantity Q
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17. ECONOMIC ORDER QUANTITY
 It is calculated by using a formula which
takes into consideration the:
• Annual demand for the item [R]
• Cost of placing one order [S]
• Cost of one unit of item [C] and
• Number of units to be carried [I]
Q = 2RS / IC
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18. THANK YOU
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