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Inventory control & management
This document discusses inventory control and management. It defines inventory as physical resources held for sale or transformation, and inventory systems as policies that monitor levels and determine replenishment needs. Reasons for holding inventory include stabilizing production, taking advantage of discounts, and meeting demand during replenishment periods. The objectives of inventory control are to track inventory levels of the right quality and quantity. Costs associated with inventory include purchase, capital, ordering, carrying, and shortage costs. Decisions around inventory planning include determining order quantities and timing.
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Inventory control & management
- 1. Inventory Control &Management
- 2. INTRODUCTION Inventory-A physicalresource that a firm holds in stock with the intent of selling it or transforming it into a more valuable state. Inventory System- A set of policies and controls that monitors levels of inventory and determines what levels should be maintained, when stock should be replenished, and how large orders should be placed.
- 3. Items carried ininventory can be Raw materials Purchased parts Components Subassemblies Work-in-process Finished goods
- 4. Reasons for keepingInventories To stabilise production To take advantage of price discounts To meet the demand during the replenishment period To prevent loss of orders(sales) To keep pace with changing market conditions
- 5. Objectives and Benefits Inventorycontrol aims at keeping track of inventories. In other words, inventories of good quality and right quantities should be made available to different departments as and when they needed.
- 6. COSTS ASSOCIATED WITHINVENTORY Purchase (or Production) cost Capital cost Ordering cost Inventory carrying costs (holding costs) Shortage cost
- 7. Inventory Planning andControl For maintaining the right balance between high and low inventory to minimize cost
- 8. Inventory Control Decisions Decisions: How much to order? When to order?
- 9. ECONOMIC ORDER QUANTITY Annual Cost ($) Higher Minimum Total Annual Stocking Costs Total Annual Stocking Costs Annual Carrying Costs Lower Annual Ordering Costs Order Quantity Smaller EOQ Larger 16
- 10. TYPES OF INVENTORYMODELS Simple EOQ model EOQ model with stock outs allowed Inventory model under risk
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- 12. EOQ model withstock outs allowed
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- 14. SELECTIVE CONTROL OFINVENTORY Selective control refers to the variation in method of control from item to item on some selective basis. Many criteria used for this purpose are Based on the cost of product Lead time Usage rate Procurement difficulties, criticality, frequency of usage
- 15. SELECTIVE CONTROL OFINVENTORY ABC analysis VED Analysis Material requirements planning (MRP)
- 16. CONCLUSIONS Careful classification of your inventory, and continuing analysis of those classifications, can play a vital role in maintaining cost at the efficient levels you have established as your goals Inventory control is a constant requirement of doing business successfully.
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