INVENTORY MANAGEMENT AND CONTROL, SALE FORCASTING, BUDGET AND COST CONTROL, INDUSTRIAL AND PERSONNEL RELATIONSHIP

1. Submitted by:- Prakash Ata
M.pharm(Pharmaceutics)
1st year
PES Colleage Of Pharmacy
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Facilitated By:
Dr. Manjula Talluri
Professor
Dept. Of Pharmaceutics
PES College Of Pharmacy,
Bangalore

2. CONTENT
Inventory management and control
Sale forcasting
 Introduction
 Objective
 Types
 Classification of inventories
 Selective inventory control
 Relationship between inventory and other management
 Inventory cost
 Introduction
 Factor
 Need of forcast
 Classification
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3. Budget and cost control
Industrial and personnel relationship
 Budget
 Cost Control
 Introduction
 Advantage of good relationship
 Introduction
 Important of Budget
 Types
 Introduction
 EOQ
 Important of cost control
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5. INTRODUCTION
 The stock of any item and resource used in an organisation is called
Inventory.
 Inventory management may be defined as a scientific method of finding out
how much to order, when to order,how much stock should be maintained in
order to meet the production demands and be able to provide right type of
material at right time, in right quantities and at right prices.
 Inventory control is different from inventory management, Inventory
control regulates the inventory that is already in a warehouse.
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6. OBJECTIVES
 Utilizing of capital and investment in proper way.
 Keeping the production on as on-going basis.
 Preventing idleness of men, machine and morale.
 Reducing administrative workload.
 Giving satisfaction to customers in terms of quality-care, competitive
price and prompt delivery.
 To minimize investment in inventory to maximize profit.
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7. TYPES
1. Production inventories.
2. MRO inventories.
3. Work in process inventories.
4. Finished product inventories.
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8. 1. Production inventories
2. MRO(Maintenance, Repairs and Operating) inventories
 Material used are chemicals such as active ingredient and excipients
needed to manufacture the finished products.
 For example:- Components such as active ingredient,excipient,containers,
labels, caps, etc.
 MRO items are used in production and plant maintenance and can
be items such as spare parts, and consumables used in the
production process.
 For example :-Cleaning product,repair tools, computer etc.
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9. 3. Work in process inventories
4. Finished product inventories
 work in process materials and components are the items on which work is
to be done further.
 These are semi-finished product.
 Example:- granules waiting for compression and tablets waiting for coating.
 Finished product are the product that have been completed by the
manufacturing process, but which have not yet been sold to customers.
 Example:- Saleable items, dosage forms, bulk drug, physician’s sample.
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10. SELECTIVE INVENTORY CONTROL :-
 Selective Inventory Control is defined as a process of classifying items
into different categories, thereby directing appropriate attention to the
material.
 Classification of material based on the inventory control:-
1. A-B-C Classification.
2. V-E-D Classification.
3. H-M-L Classification.
4. F-S-N Classification.
5. S-D-E Classification.
6. G-O-L-F Classification.
7. X-Y-Z Classification.
8. S-OS Classification. 10

11. 1. A-B-C Classification :-
 A-B-C analysis states that when a large number of items are involved, relatively a few
item account for a major part of activity, based on annual value of consumption of
items.
 According to A-B-C analysis, inventories are reported in percent averages and
classified as follows :-
 A-items :- 20% of the items are of the highest value and their inventory accounts
 B-Items :- 30% of the items are of the intermediate value and their inventory
 C-Items :-50% of the items are of the lowest value and their inventory accounts
for 70% of the total. These items needs careful and close control.
accounts for 25% of the total. These items need moderate control.
for the relatively small balance i.e., 5%. These items does not require
any control.
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12. A-B-C Analysis
In stock(%)
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13. 2. V-E-D classification :-
 VED analysis is based on priority and importance to patients’ health .
 V-E-D stands for:-
V – Vital.
E – Essential.
D – Desirable.
 V-Vital :- V class drugs are the life-saving drug like vaccines, and needed for life support.
 E- Essential :-E class drugs, which have lower severity, are efficient for therapy of less life
 D–Desirable :- The remaining drugs with lowest severity, which are used for therapy of
(EX:- some antibiotics, serums, insulins, etc.)
threatening .
(EX :- life supporting items like transfusion fluids, etc.)
slight diseases, are included in D class drugs.
(EX :- Vitamin, sun screen lotions etc.)
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14. 3. H-M-L Classification :-
 Its based on unit value (in rupees) of items.
 H-M-L stands for
 H-M-L is similar to A-B-C analysis, which is based on the annual
consumption.
 These items ordered should be listed in the decreasing order of the unit value
and management may fix limits for deciding the three categories.
 H – High.
 M – Medium.
 L – Low.
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15. 4. F-S-N Classification :-
 F-S-N classification takes into account the distribution and handling
issues of the items from stores.
 F-S-N stands for :-
F – Fast moving.
S - Slow moving.
N - Non-moving.
 There may be a change in technology or a change in specification or an
item is no longer in use in such cases F-S-N classification are made.
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16. 5. S-D-E Classification :-
 S-D-E Classification is based on lead-time analysis and availability.
 S-D-E Stands for :-
 If the item is scare and in A – category, the normal procedure cannot be
applied.
 S – Scarce : Take longer time (imported)
 D – Difficulty : long lead time(indigenous)
 E – Easy : Reasonable lead time
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17. 6. G-O-L-F Classification:-
 G-O-L-F stands for :-
 In this the imported items are normally procured through government
organization.
 Special procedures are followed for procuring them, since ordinary
procedure of inventory may not work.
 G – Government.
 O – Ordinary.
 L - Local.
 F – Foreign.
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18. 7. X-Y-Z Classification :-
 The XYZ analysis is a way to classify inventory items according to
variability of their demand.
 X – Very little variation over time.
 Y – Some variation over time.
 Z – The most variation over time.
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20. 8. SOS classification:-
 SOS analysis is based on seasonality of item and it classifies all the item into
two category:
 The seasonal items which are available only for a limited period should be in
stocked for meeting the needs of the full year.
 SOS classification identify the items that are seasonal but available
throughout the year however their costs in off season are relatively high.
 S - Seasonal
 OS - Off Seasonal
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21. DIFFERENCE BETWEEN WAREHOUSE MANAGEMENT
AND INVENTORY MANAGEMENT
 Inventory management will not help to locate the products exact
location in warehouse whereas, WMS can give the information of
material with the exact code number where the products are stored.
 In a warehouse, there might be multiple storage involved for a single
product, WMS helps us manage all of these. Whereas, IMS would only
update you with the specific product count.
 Both inventory and warehouse management systems enable companies
to use barcode devices for tracking or billing the product and to sync
their inventory.
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22. RELATIONSHIP BETWEEN MATERIAL MANAGEMENT
AND INVENTORY MANAGEMENT
 Material management and inventory management are both under
supply chain management.
 Material management mainly do their work (planning, purchasing,
storage etc) by discuss with inventory management.
 Inventory management may be a part of material management.
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23. RELATIONSHIP BETWEEN PRODUCTION
MANAGEMENT AND INVENTORY MANAGEMENT
 production management is work with planning, organizing, directing and
controlling the activities of the production whereas inventory management
mainly focus on availability or stock of inventory for smooth production.
 If there is any problem with inventory management then it can effect on
production management to produce the finish product and vice versa.
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24.  Inventory costs are the costs related to storing and maintaining its inventory
over a certain period of time.
 Inventory costs are described as a percentage of the total inventory value.
 In India, inventory costs vary from 28 to 32% of the total cost.
 There are three basic costs associated with inventory
INVENTORY COSTS
1. Carrying or holding costs
2. Ordering costs
3. Shortage costs
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25. 1. HOLDING / CARRYING COSTS
 Storage space (Rent/Depreciation).
 Property tax on warehousing.
 Insurance.
 Material handling and maintenance.
 Security and documentation.
 Capital blocked.
 Quality Control.
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26. 2. ORDERING COSTS
 Ordering costs are the costs related to the preparation of a supplier’s order,
including the cost of placing an order, inspection costs, documentation costs,
and others.
 Ordering cost include:-
• Cost to prepare a purchase order.
• Cost of the labor required to inspect material or equipment
when they are received.
• Cost to put away material once they have been received.
• Cost to process the supplier invoice related to an order.
• Cost to prepare and issue a payment to the supplier.
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27. 3. SHORTAGE COSTS
 Shortage costs also referred as stock out costs, occur when demand can
not be met because of insufficient inventory.
 Shortage cost include:-
 Loss of business/profit.
 Additional expenditure due to urgency of purchases
A. Telegraph /telephone charges.
B. Purchase at premium.
C. Air transport charges.
D. Loss of labour hours.
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29. INTRODUCTION
 Forecasting is a process of predicting a future event.
 Sale forecast is the estimate of amount of sale to be expected for a item or
products for a future period of time.
 Accurate sales forecasts enable companies to make business decisions.
 Companies can base their past sales data, industry-wide comparisons, and
economic trends.
 Sales forecasting can help to achieve sales goals.
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30. FACTOR TO BE CONSIDER FOR SALE FORCASTING
 Labour problems.
 Inventory shortages.
 Working capital shortage.
 Change in distribution method.
 Direct and indirect competition.
 Weather.
 Consumer earnings.
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31. NEEDS OF FORCASTING
 Forecasting overcome the uncertainty about the demand and provides a
workable solution.
 Production planning.
 Financial planning.
 Personnel planning.
 Scheduling planning.
 Facilities planning.
 Process design.
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32. CLASSIFICATION OF FORECASTING PROCESS
 Based on the forecast time period, the forecasting methods
can be classified into three:-
Short range – up to 1 year
Medium range – 1 to 3 years
Long range – 5 years or more.
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33.  Based on the methodology, the forecasting methods
can be classified into two:-
Time series methods use historical data as the
basis of estimating future outcomes.
Causal methods
Time- series method
This process helps to identify the factor that
might influence the forcast.
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35. BUDGET
 A budget is a financial plan for a defined period of time,
usually a year.
 It is an estimate of income and expenditure for a set period
of time.
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36. IMPORTANCE OF BUDGET
 A budget is a way of being intentional about the way
you spend and save your money.
 Budgeting saves adjust to lack of funds.
 Budget enable the actual financial operation of the
business to be measured against the forecast.
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37. TYPES
 Sales Budget
 Production Budget
 Capital Budget
 Marketing Budget
 Project Budget
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38. COST CONTROL
 Cost control can be defined as the process or activity on
controlling costs associated with activity or process of any
organization.
 It can also be defined as the process of monitoring and
regulating the expenditure of funds so that profit can
increase.
 Cost can be control by determining the Economic Order
Quantity(EOQ).
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39. ECONOMIC ORDER QUANTITY(EOQ)
 EOQ is the amount of inventory to be ordered at one time
for purposes of minimizing annual inventory cost.
 The objective is to determine the quantity to order which
minimize the total annual inventory management cost.
 In determining EOQ, it is assumed that cost of managing
inventory is made up mainly of two parts i.e.,
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Ordering costs/ Buying costs
Carrying costs/ Holding costs

40. EOQ FORMULA
 EOQ can be calculate by using following formula:-
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Where,
D = Demand per time period.
H = Carrying / holding cost of 1 unit of stock
S = Cost per order.
for one period.

41. IMPORTANCE OF COST CONTROL
 Cost Control focuses on decreasing the total cost.
 Establishment of budgets for each function.
 It also gives understanding about the restrictions to be
followed.
 Continuous comparison of the actual performance with
budget to know the variations.
 Maintain high sale.
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43. INDUSTRIAL AND PERSONNEL RELATIONSHIP
 It is the relationship which exists between employers and
employees.
 It is most important that this relationship is good.
 The relationship between employers and employees are
maintain by trade union.
 Trade union is an organisation formed by workers to protect
the interests of their members.
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44. ADVANTAGE OF GOOD INDUSTRIAL AND
PERSONNEL RELATIONSHIP
 Discussions take place on an ongoing basis.
 Maintain plant discipline.
 Improved living and working conditions by minimize the
number of strikes.
 Improve the economic conditions of workers.
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45. REFERENCE
 https://www.thebalancesmb.com/maintenance-repair-and-operating-supplies-mro-
2221265
 https://www.camcode.com/asset-tags/inventory-control-systems-types/
 https://www.linkedin.com/pulse/inventory-control-pharmaceutical-supply-chain-
pinto/
 https://www.referenceforbusiness.com/management/Int-Loc/Inventory-Types.html
 http://accounting-financial-tax.com/2009/04/qualitative-forecasting-methods-and-
techniques/
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46.  https://www.cgma.org/resources/tools/cost-transformation-model/xyz-inventory-
management.html
 https://industrialengg.wordpress.com/2011/07/25/selective-inventory-control-criteria-
and-sos-analysis/amp/
 https://www.researchgate.net/post/what_the_difference_between_material_managem
ent_and_material_requirement_planning
 http://www.businessmanagementideas.com/sales/forecasting-sales/sales-forecasting-
meaning-importance-and-methods/7122
 https://www.investopedia.com/terms/c/cost-control.asp
 http://www.businessdictionary.com/definition/budget.html
 https://www.scribd.com/doc/64248327/Objectives-of-Industrial-Relations
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