The document discusses various aspects of inventory management including types of inventory, key activities involved, analysis methods like ABC analysis and Kraljic matrix, and policies for different inventory classes. It explains determining reorder points and economic order quantities using models that consider factors like demand rate, lead time, safety stock and ordering/carrying costs. The importance of accurate record keeping through tools like stock cards and books is also highlighted.

1. INVENTORY MANAGEMENT By: Mubarak Al-Mansouri

2. OPTIMAL USE OF KEY RESOURCES STORES AND SPARES INVENTORY

4. Inventory Management Means… Properly maintaining adequate stocks to ensure uninterrupted service

9. Kraljic’s supply matrix Low Spending High High Supply risk Low Bottleneck items *Supplier’s technology critical *Difficult to substitute *Unique requirements Critical items *Unique specifications *Supplier’s technology critical *Difficult to substitute *Unique specifications Non-critical items *Many suppliers available *Easy-to-find substitute products Leverage items *Large volume purchases *can find substitutes *many suppliers available

11. ABC Classification: Example 1 $ 60 90 2 350 40 3 30 130 4 80 60 5 30 100 6 20 180 7 10 170 8 320 50 9 510 60 10 20 120 PART UNIT COST ANNUAL USAGE

12. ABC Classification: Example (cont.) Example 10.1 1 $ 60 90 2 350 40 3 30 130 4 80 60 5 30 100 6 20 180 7 10 170 8 320 50 9 510 60 10 20 120 PART UNIT COST ANNUAL USAGE TOTAL % OF TOTAL % OF TOTAL PART VALUE VALUE QUANTITY % CUMMULATIVE 9 $30,600 35.9 6.0 6.0 8 16,000 18.7 5.0 11.0 2 14,000 16.4 4.0 15.0 1 5,400 6.3 9.0 24.0 4 4,800 5.6 6.0 30.0 3 3,900 4.6 10.0 40.0 6 3,600 4.2 18.0 58.0 5 3,000 3.5 13.0 71.0 10 2,400 2.8 12.0 83.0 7 1,700 2.0 17.0 100.0 $85,400 A B C % OF TOTAL % OF TOTAL CLASS ITEMS VALUE QUANTITY A 9, 8, 2 71.0 15.0 B 1, 4, 3 16.5 25.0 C 6, 5, 10, 7 12.5 60.0

14. Determine How Much to Re-order Demand rate Time Lead time Lead time Order placed Order placed Order receipt Order receipt Inventory Level Reorder point, R Order quantity, Q 0

15. Determine When to Re-order Reorder point, R Q LT Time LT Inventory level 0 Safety Stock

16. Continuous Review

17. Periodic Review

19. EOQ Cost Model Order Quantity, Q Annual cost ($) Total Cost Carrying Cost = C c Q 2 Slope = 0 Minimum total cost Optimal order Q opt Ordering Cost = C o D Q

20. Perform a “Stock Count” All stock must be accounted for. Everything that comes in and goes out must be recorded. What is it? Physically counting each item in the inventory When is it done? In the beginning of each month recommended Who does it? A designated person

23. Stock Book: An Example Item Name Qty (units) Requested Date Requested Qty Received Date Received Lot # Expiry Date

24. Suggested Policy Guidelines for A,B & C classes of item A items (High) B items (Moderate) C items (Low ) Very strict control Moderate Control Loose control No or very low safety stock Low safety stock High safety stock Phase delivery (Weekly) Once in 3 months Once in 6 months Weekly control report Monthly control report Quarterly report Maximum follow up Periodic follow up Exceptional

25. Suggested Policy Guidelines for A,B & C classes of item A items (High) B items (Moderate cons. Val) C items (Low ) As many sources as possible Two or more reliable Two reliable Accurate forecasts Estimates on past data Rough estimate Central purchasing / storage Combination purchasing Decentralised Max. efforts to control LT Moderate Min. clerical efforts To be handled by Sr. Officers Middle level Can be delegated