This document discusses inventory management. It defines inventory and explains that inventory management aims to balance minimizing investment in inventory while maximizing customer service. There are various types of inventory like cycle, safety, anticipation, and pipeline inventory which are held for different reasons. Effective inventory management faces challenges in knowing stock levels and locations. Different techniques like EOQ, ABC analysis, and inventory control systems help managers to better control inventory.

1. INVENTORY MANAGEMENT
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Rahul Sunda
110629

2. CONTENTS:-
 1.INTRODUCTION
 2.OBJECTIVE
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 3.IMPORTANT TERM USED IN INV.MNG.
 4.PRESSURE FOR LOW &HIGH INVENTORY
 5.TWO FORMS OF DEMAND
 6.TYPES OF INVENTORY
 7.CHALLANGES IN I.M.
 8.TECTICS USED TO CONTROL INVENTORY
 9.EOQ ANALYSIS
 10.ABC ANALYSIS
 11.INVENTORY CONTROL SYSTEM
 12.P&Q SYSTEMS 2

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INVENTORY
Inventory is anything which can be store for
future needs or demand, it can be in any form like
man, machine, raw material, machine hours ,
finished goods etc.
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4. INVENTORY MANAGEMENT
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 Inventory management, is the planning and
controlling of inventories in order to meet the
competitive priorities of the organization, is an
important concern for managers in all types of
businesses.
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5. INTRODUCTION CONTINUED
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 Inventory control is concerned with achieving
an optimum balance between two competing
objectives.
1) Minimizing the investment in inventory.
2) Maximizing the service levels to customer’s
and it’s operating departments.
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6. INVENTORY ACT AS A CUSHION
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If Operation has full of problem , like labour
absenteeism is high worker’s moral is also low ,
equipment working is not so good , logistic system
is not so good , than also if a company has very
excess amount of inventory , then no-one knows
about these problem.
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7. OBJECTIVES
The specific objectives of inventory management are
as follow:
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a) Keeping the production on as on-going basis.
b) Preventing idleness of men, machine .
c) Utilizing of scare resources (capital) and investment
judiciously.
d) Avoiding risk of loss of life (moral & social).
e) Giving satisfaction to customers in terms of quality-
care, competitive price and prompt delivery.
f) Inducing confidence in customers and to create trust
and faith.
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8. IMPORTANT TERM USED IN I.M.
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 Lot Size:- The quantity of an inventory item
management either buys from a supplier or
manufactures using internal processes
 SKU:- An individual item or product that has an
identifying code and is held in inventory
somewhere along the supply chain.
 Reorder Point:-it is that point where new order is
placed & it is dependent on lead time
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9. PRESSURE FOR INVENTORY
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 A Manager consistently dealing with low and
high inventory according to the nature of product,
customer demand, supplier efficiency , lead time.
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10. PRESSURE FOR LOW INVENTORY
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 Cost of Capital:-
(a) Opportunity cost
(b) Total Holding Cost
 Taxes
 Insurance
 Shrinkage
 Storage
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11. PRESSURE FOR HIGH INVENTORY
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 Customer Side
 Set up cost
 Ordering Cost
 Labour/equipment utilization
 Transportation Cost
 Payment to Suppliers
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12. TWO FORMS OF DEMAND
 Dependent
 Demand for items used to produce final products
and that is influence by other item.
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 Tires stored at a plant are an example of a
dependent demand item.
 Independent
 Demand for items used by external
Customers , that don’t influence by other
Item.
EX. Cars, appliances, computers, and
houses are examples of independent
demand inventory.
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13. DEMAND CONTINUED
Independent Demand
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A Dependent Demand
B C
D E D F
Independent demand is uncertain.
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Dependent demand is certain.

14. TYPES OF INVENTORY
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 By using the concept of what is order size and
what is time between the order or lot size ,
Inventory are of 4 types:-
 Cycle Inventory
 Anticipation Inventory
 Safety Inventory
 Pipe Line Inventory
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15. CYCLE INVENTORY
 Cycle inventory related with concept of LOT size , it is that
portion of inventory which varies directly with LOT size.
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 So it directly depends on cycle time or LEAD time(time
between two orders)
 Average cycle inventory(when demand rate is
constant)=q+0/2=q/2
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16. CYCLE CURVE
Profile of Inventory Level Over Time
Q
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
Deman
d
rate
Quantit
y
on hand
Reorder
point
Time
Receive Place Receive Place Receive
order order order order order
Lead time 16

17. SAFETY STOCK INVENTORY
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 Surplus Inventory that protects against
uncertainties in demand , lead time ,and supply
changes.
 It also avoid customer service problems and in
the emergency situation.
 It achieve through two ways:-
 1.before lead time order is placed.
 2.more order is placed.
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18. ANTICIPATION INVENTORY
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It is that part of Inventory which is held for meet in
peak season demand , so this type of Inventory is
intensely created because a certainty is there that it
will consume in peak season.
It also help when suppliers are threatened with a strike
or have severe capacity limitations.
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19. PIPE LINE INVENTORY
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 Inventory that is created when an order for an
item is issued but not yet placed in inventory.
 It exists in the form of materials that move from
supplier to a plant , from one operation to the
next in the plant ,or plant to a customer, or from
the distribution centre to a retailers.
 Longer lead time or higher demand at a frequent
time create more pipe line inventory.
 pipe line inventory=d.L
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20. CHALLENGES IN I.M.
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 What is in the Stock ?
 What quantity of a single product is available?
 Where it is being held ?
So big retail chain stores like Walmart
(U.S.A.) ,Tesco (U.K.), Carrefour(France) used
RFIS System.
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