This document discusses inventory control and various inventory management techniques. It defines inventory as materials kept in stock, including raw materials, components, work-in-process, and finished goods. It then describes different types of inventories and introduces key inventory terms like lead time, holding costs, ordering costs, and shortage costs. The document outlines techniques for effective inventory management including ABC analysis, VED analysis, economic order quantity modeling, first-in first-out, and last-in first-out costing methods. The goal of inventory control and analysis is to maintain optimal inventory levels to minimize costs.

1. Inventory Control
Presented by ,
Athulya.S
BME trainee
GMCT

2. Inventory? ?
Generally refers to the material in stock
Raw materials
Component parts
Work-in-process
 Finished products, etc.

3. BP apparatus

4. Types of inventories
Direct Inventories Indirect inventories
•Raw materials
•Finished goods
•Spare parts
•Petrol
•Office materials
•Grease
•Oil lubricants

5. Modeling Inventory in a Supply
Chain…
Warehouse Retail
Supplier

6. How do you manage your inventory?
How much do you buy?
When and from where?
Vegetables
Milk
Medicine
Equipment spare parts

7. Inventory Control
Inventory control is the technique of
maintaining the size of the inventory at
some desired level keeping in view the best
economic interest of an organization.

8. Why inventory control?
Avoiding stock outs
Over stock hazards

9.  Lead time: time interval between ordering and
receiving the goods.
 Holding (carrying) costs: cost to carry an item in
inventory for a length of time, usually a year.
 Ordering costs: costs of ordering and receiving
inventory.
 Shortage costs: costs when demand exceeds
supply.
Key Inventory Terms

10. Contd..
 Maximum stock level :Quantity of inventory
above which should not be allowed to be kept.
 Minimum Stock level :Represents the
quantity below which stock should not be
allowed to fall.
 Reorder level: Denotes the stock
level at which fresh order has to be placed.
 Trade group:

11.  Hedge against uncertain demand
 Hedge against uncertain supply
 Storing resources
 Quantity discounts
 Avoiding stock outs and shortages
 Regulates the investments
Benefits of Inventory

12. Inventory Planning and Control
For maintaining the right balance between high
and low inventory to minimize cost

13.  A system to keep track of inventory
 A reliable forecast of demand
 Knowledge of lead times
 Reasonable estimates of
Holding costs
Ordering costs
Shortage costs
Effective Inventory
Management

14. Inventory Counting Systems
 Periodic System
Physical count of items made at periodic
intervals
 Perpetual Inventory System
System that keeps track
of removals from inventory
continuously, thus
monitoring
current levels of
each item.

15. Inventory Counting Systems
(Contd..)
 Two-Bin System - Two containers of
inventory; reorder when the first is empty
 Universal Bar Code - Bar code
printed on a label that has
information about the item
to which it is attached
0
214800
232087768

16. Inventory Analysis
VED
ABC
EOQFIFO
LIFO

17. ABC Analysis
• Based on cost criteria
• The items in a store can be categorized into 3
groups
A items
B items
C items
Annual
value
of items
A
B
C
High
Low
Low High
Percentage of Items

18. A Items
 10% of the total number of items
 70% of the annual consumption cost
B Items
 20% of the total number of items
 20 % of the annual consumption cost
C Items
 70 per cent of the total number of items
 10 per cent of the annual consumption cost

19. VED Analysis
• Primarily used for the control of spare parts.
• Spare parts can be of
 Vital
 Essential
 Desirable

20. VED Analysis (Contd..)
Vital Essential Desirable
The stock out of
which even for
minutes will stop
production.
Stock out of which
even for a few hours
of days will rise the
cost of lost
production.
Needed , but their
absence for short
period will not lead to
stoppage of
production.

21. EOQ model
• Minimum Cost Quantity approach.
• Orders materials whenever stock reaches the
reorder point.
• deals when the cost of procurement and
handling of inventory are at optimum level and
total cost is minimum..

22. When to Reorder with EOQ
Ordering
 Reorder Point - When the quantity on hand
of an item drops to this amount, the item
is reordered
 Safety Stock - Stock that is held in
excess of expected demand due to
variable demand rate and/or lead time.
 Service Level - Probability that demand
will not exceed supply during lead time.

23. FIFO
 First In First Out
 Assumes that the first unit making its way
into inventory is the first sold.
1st
in

24. FIFO( Contd..)
• Continue to work forward until the total
number of units sold during the period to
cost of goods sold.
• Allocates the remaining costs to ending
inventory.
2nd
3rd

25. LIFO
• This method assumes that the last unit
making its way into inventory is sold first.
• The older inventory, therefore, is left over
at the end of the accounting period.

27. Thank you