This document summarizes the total inventory value of different inventory types held by a company. It lists raw materials, work in progress, ready made components, scraps, finished goods, dead stock, stock on hold, consumables, and excess stock. For each inventory type, it provides the reasons for holding or not holding the inventory and any associated monetary values. It also analyzes root causes of inventory issues such as not following systems, poor inventory control, and lack of training. Suggested corrective actions include setting maximum-minimum inventory limits, determining reorder points and quantities, and improving perpetual inventory control. Preventative actions proposed are deciding inventory limits, ABC analysis, and controlling turnover.

1. TOTAL INVENTERY VALUE (Cr):
S. No Type of Reason for holding the Inventory
Inventory
1 Raw materials To reap the price advantage available on seasonal raw
materials.
Meet variations in customer demand:
Meet unexpected demand
Smooth seasonal or cyclical demand
Pricing related
Temporary price discounts
Hedge against price increases
Take advantage of quantity discounts
Process & supply surprises
Internal – upsets in parts of or our own processes
External – delays in incoming goods
2 Work in progress To balance the production flow.
(Work that has not been completed but has already incurred a
capital investment from the company.)
3 Ready made When the components are bought rather than made
components Pricing related
(BOP) Temporary price discounts
Hedge against price increases
Take advantage of quantity discounts
4 Scraps They are disposal of in bulk. Scrap & Obsolete -
Materials that are rejected, damaged and not usable or
those that have crossed the shelf life and expiry date
are categorized under scrap category.

2. 5 Finished Goods Lying in stock rooms and waiting dispatches
6 Dead Stock Change the design without any prior notice or without
consuming the old stock
7 Stock on Hold - Inventory that is frozen/blocked and cannot be released
for sale or consumption. (This is the FG stock and It
was prepared on MSF) Eg - Export
8 Consumable To reap the price advantage available on seasonal raw
materials.
Meet variations in customer demand:
Meet unexpected demand
Smooth seasonal or cyclical demand
Pricing related
Temporary price discounts
Hedge against price increases
Take advantage of quantity discounts
9 Excess stock No reason

3. 295046592
Reason for not holding the Value (Cr.)
Inventory unit - I unit - II Retail Total
Carrying cost 5283342 10123168 3322 15409832
Financially calculable
Takes up valuable factory space
Especially for in-process inventory
Inventory covers up “problems” …
We can not do work in batch/Mass 4132701 33020474 39599 37192774
production system
Carrying cost 40697336 111425991 2772896 154896223
Financially calculable
Takes up valuable factory space
Inventory covers up “problems” …
Can be arranged easily within in
shortest lead time
To maintain proper 5S 0

4. 1. FG inventory holding becomes
necessary in cases where the lead-
20517241 45211180 2559325 68287746
time for production is long. Sudden
market demand or opportunities in
such cases require FG inventories to
be built up and supplies to be
effected. 2. Organizations hold
FG inventories to satisfy customer
demand, to reduce sales management
and ordering costs, stock out costs
and reduce transportation costs and
lead times.
N/A 0 7400000 7400000
5800000 0 5800000
Carrying cost 1584664 4058611 416742 6060017
Financially calculable
Takes up valuable factory space
Especially for in-process inventory
Inventory covers up “problems” …
Carrying cost 0 0 0
Financially calculable
Takes up valuable factory space
Especially for in-process inventory
Inventory covers up “problems” …
78015284 211239424 5791884 295046592

5. Root Cause Corrective action
1. Not following the system. 2. Quantity of inventory above which should not
No one man contact (Many persons are be allowed to be kept. This quantity is fixed
giving the orders). 3. Poor keeping in view the disadvantages of
inventory control in the store and shop overstocking.
floor. 4. Poor Factors to be considered:
awareness of people in purchase, Amount of capital available.
inventory control & shop floor. Godown space available.
5. Bullwhip Effect Possibility of loss.
6. Produce part by part (For some parts Cost of maintaining stores;
inventory are high in some case it is Likely fluctuation in prices;
very low) 7. Seasonal nature of supply of material;
Frequently order conciliation 8. Restriction imposed by Govt.;
Training required 9. Possibility of change in design
Less space for ware house and storage
10. Models varity is more
1. Poor awareness of line engineers & 1. Maximum WIP should be only for a day on
Area managers. 2. line.
Poor 5s in store and shop floor. 3.Not 2. Max WIP should be for 2 days production in
using the issue slip for issuing the Assy line.
material from store
1. Not following the system. 2.
Poor inventory control in the store and
shop floor. 3. Poor
awareness of people in purchase,
inventory control & shop floor.
4. Bullwhip Effect
5. Produce part by part (For some parts
inventory are high in some case it is
very low) 6.
Frequently order conciliation 7.
Training required 8.
Less space for ware house and storage
9. Models varity is more

6. 1. First we have to check all the
inventory available in as per BOM
in store for current design product,
before change the design.
2. Frequently change in design
without taking the team into
confidence.
Poor planning in inventory 1. Store person will maintain the max and min
management stock, if the material goes over the max stock ,
he will not receive the material. 2.
Purchaser will prepare the schedule and vendor
will supply the material as per schedule.

7. Preventive action Supporting
documents
— Deciding the maximum- minimum
1.
limits of inventory;
2. Determination of Reorder point;
Determination of reorder quantity;
3. Perpetual inventory control;
4. ABC analysis;
5. Method of control through turn
over.
Daily recording of WIP

8. — Deciding the maximum- minimum
1.
limits of inventory;
2. Determination of Reorder point;
Determination of reorder quantity;
3. Perpetual inventory control;
4. ABC analysis;
5. Method of control through turn