This document discusses various inventory management techniques. It begins by defining inventory and inventory management. It then lists the objectives of inventory management and describes several tools used, including fixing maximum, minimum, re-order, and danger levels. Additional tools discussed include ABC analysis, EOQ, perpetual inventory systems, VED analysis, FSN analysis, and periodic inventory evaluation. The document also outlines various costs associated with inventory like financial, storage, price fluctuation, and obsolescence costs. Finally, it briefly describes several inventory management methods such as min-max, automatic order systems, just-in-time, ordering cycle, inventory turnover ratio, and input-output ratio analysis.
This document discusses material control and inventory management. It defines key terms like materials, inventory, and different stock levels. It describes the objectives and operations of material control like purchasing, inspection, and storage of materials. Methods to determine economic order quantity, set stock levels like reorder point, minimum and maximum levels are presented. Documentation for material procurement, storage, and issuance are covered. Pricing methods for materials issued like FIFO, LIFO, simple average and weighted average are also summarized.
This document discusses inventory and stock control methods used in manufacturing. It defines key terms like inventory, stock, materials, and stores. Some common inventory control methods are described like setting stock levels, economic order quantity, just-in-time inventory, and ABC analysis. Stock levels discussed include reorder level, minimum level, maximum level, average level, and danger level. Formulas for calculating various stock levels are provided. Lead time, consumption rate, and reorder quantity are also important concepts covered.
Inventory control is the process of measuring and regulating inventory according to predetermined norms like economic order quantity to reduce costs. It aims to balance ordering, holding, and shortage costs. Key aspects of inventory control include classifying items using ABC analysis based on annual consumption value, determining reorder points and levels, and maintaining safety stocks to account for demand fluctuations and lead time uncertainties. The economic order quantity model calculates the optimal order size to minimize total annual inventory costs.
This document discusses various aspects of inventory management including classification of inventory, objectives of inventory control, costs associated with inventory, different inventory categories, selective inventory control methods, reorder quantity determination, and economic order quantity calculation. Key concepts covered include direct and indirect inventory, aims of minimizing costs while avoiding stockouts, and classification systems to focus control efforts.
Material control is a system that ensures the efficient procurement, storage, and use of materials. It aims to provide the right quality and quantity of materials at the minimum possible cost. Key aspects of material control include establishing stock levels to prevent understocking or overstocking, using economic order quantities to minimize purchasing costs, and implementing inventory tracking systems. Techniques like ABC analysis prioritize materials based on value and VED analysis categorizes spare parts based on criticality to operations. Material control helps ensure uninterrupted production while optimizing investment in inventory.
The document discusses various concepts related to materials management and costing. It defines key terms like cost, cost accounting, objectives of cost accounting. It describes different cost classification methods, materials control techniques like bin cards, store ledgers. It explains concepts of economic order quantity, reorder level, maximum and minimum levels. Finally, it summarizes different inventory valuation methods like FIFO, LIFO, simple and weighted average.
This document discusses key concepts in materials management and cost accounting. It defines cost, cost accounting, and their objectives. It describes different cost elements and classification methods. It also explains important materials management concepts like bin cards, store ledgers, economic order quantity, and inventory levels. Lastly, it discusses two inventory valuation methods - FIFO and LIFO.
The document discusses various concepts related to materials management and costing. It defines key terms like cost, cost accounting, objectives of cost accounting. It describes different cost classification methods, materials control techniques like bin cards, store ledgers. It explains concepts of economic order quantity, reorder level, maximum and minimum levels. Finally, it discusses different inventory valuation methods like FIFO, LIFO, simple and weighted average.
This document discusses material control and inventory management. It defines key terms like materials, inventory, and different stock levels. It describes the objectives and operations of material control like purchasing, inspection, and storage of materials. Methods to determine economic order quantity, set stock levels like reorder point, minimum and maximum levels are presented. Documentation for material procurement, storage, and issuance are covered. Pricing methods for materials issued like FIFO, LIFO, simple average and weighted average are also summarized.
This document discusses inventory and stock control methods used in manufacturing. It defines key terms like inventory, stock, materials, and stores. Some common inventory control methods are described like setting stock levels, economic order quantity, just-in-time inventory, and ABC analysis. Stock levels discussed include reorder level, minimum level, maximum level, average level, and danger level. Formulas for calculating various stock levels are provided. Lead time, consumption rate, and reorder quantity are also important concepts covered.
Inventory control is the process of measuring and regulating inventory according to predetermined norms like economic order quantity to reduce costs. It aims to balance ordering, holding, and shortage costs. Key aspects of inventory control include classifying items using ABC analysis based on annual consumption value, determining reorder points and levels, and maintaining safety stocks to account for demand fluctuations and lead time uncertainties. The economic order quantity model calculates the optimal order size to minimize total annual inventory costs.
This document discusses various aspects of inventory management including classification of inventory, objectives of inventory control, costs associated with inventory, different inventory categories, selective inventory control methods, reorder quantity determination, and economic order quantity calculation. Key concepts covered include direct and indirect inventory, aims of minimizing costs while avoiding stockouts, and classification systems to focus control efforts.
Material control is a system that ensures the efficient procurement, storage, and use of materials. It aims to provide the right quality and quantity of materials at the minimum possible cost. Key aspects of material control include establishing stock levels to prevent understocking or overstocking, using economic order quantities to minimize purchasing costs, and implementing inventory tracking systems. Techniques like ABC analysis prioritize materials based on value and VED analysis categorizes spare parts based on criticality to operations. Material control helps ensure uninterrupted production while optimizing investment in inventory.
The document discusses various concepts related to materials management and costing. It defines key terms like cost, cost accounting, objectives of cost accounting. It describes different cost classification methods, materials control techniques like bin cards, store ledgers. It explains concepts of economic order quantity, reorder level, maximum and minimum levels. Finally, it summarizes different inventory valuation methods like FIFO, LIFO, simple and weighted average.
This document discusses key concepts in materials management and cost accounting. It defines cost, cost accounting, and their objectives. It describes different cost elements and classification methods. It also explains important materials management concepts like bin cards, store ledgers, economic order quantity, and inventory levels. Lastly, it discusses two inventory valuation methods - FIFO and LIFO.
The document discusses various concepts related to materials management and costing. It defines key terms like cost, cost accounting, objectives of cost accounting. It describes different cost classification methods, materials control techniques like bin cards, store ledgers. It explains concepts of economic order quantity, reorder level, maximum and minimum levels. Finally, it discusses different inventory valuation methods like FIFO, LIFO, simple and weighted average.
This document discusses concepts related to materials management and cost accounting. It defines key terms like cost, cost accounting, cost elements, and objectives of cost accounting. It describes different cost accounting techniques like bin cards, store ledgers, bills of materials, and stock valuation methods. It also discusses concepts of economic order quantity, reorder levels, and materials management techniques like ABC analysis. The purpose is to explain the process of materials management and cost accounting.
The document discusses inventory control model and concepts for effective supply chain management. It describes the types of materials needed in an industrial unit and importance of materials for plant operations. It then explains the inventory control model which operates based on minimum, maximum, reorder and average stock levels calculated using formulas. Factors influencing inventory control like consumption rate, order quantity, and lead time are also covered.
hey friends, we know from earlier research that material control is the major component of cost. so, let us have a look at few tenchniques relating to material control
This document defines inventory and discusses inventory control. It defines inventory as raw materials, work in progress, and finished goods. Inventory control aims to maintain optimal inventory levels for smooth operations. Inventories are classified and objectives of inventory control include avoiding over/under investment and providing the right goods at the right time. Operating objectives focus on availability, minimizing waste, and customer service, while financial objectives focus on costs. Inventory management aims to balance ordering costs, carrying costs, and stockout costs.
INVENTORY MANAGEMENT
TECHNIQUES OF INVENTORY CONTROL
ECONOMIC ORDERING QUANTITY (EOQ)
Maximum Stock Level
Minimum Stock Level
Danger Level
ABC ANALYSIS FOR VALUE OF ITEMS
Perpetual Inventory System
H.M.L. Classification
F S N Analysis
V.E.D. Classification
Just in Time (JIT)
Inventory Turnover Ratio
WORKING CAPITAL MANAGEMENT
RECEIVABLES MANAGEMENT
COSTS OF MAINTAINING RECEIVABLES
BENEFITS OF MAINTAINING RECEIVABLES
FACTORS AFFECTING THE SIZE OF RECEIVABLES
CREDIT PERIOD
OPTIMUM SIZE OF RECEIVABLES
DETERMINANTS OF CREDIT POLICY
OPTIMUM CREDIT POLICY
Credit standards
Credit terms
CREDIT EVALUATION
1. Inventory management involves determining appropriate inventory levels and replenishment policies to balance inventory holding costs, ordering costs, and the need to meet customer demand.
2. Key aspects of inventory management include classifying inventory items, determining economic order quantities, setting reorder points, and using periodic or continuous review systems.
3. The goals of effective inventory management are to provide good customer service while minimizing total inventory costs.
The document discusses various aspects of production management including definitions, objectives, and key functions. Production management aims to produce quality products according to specifications, on schedule, and at minimum cost. It involves planning and regulating the transformation of raw materials into finished goods. Key aspects of production management include material management, cost control, and operational management. Material management involves inventory control and purchase functions. Cost control focuses on labor and material costs. Effective production management is essential for business success.
This document provides an overview of material and labour cost control. It discusses material control techniques like ABC analysis, VED analysis, inventory levels, and economic order quantity. It describes the steps in material control like purchase requisition, selection of suppliers, and receipt of materials. Pricing methods for material issues like FIFO, LIFO, and average cost are explained. The document also covers labour cost elements like direct and indirect labour. It defines idle time and overtime, and discusses causes of idle time like administrative, productive and economic causes. Time rate and piece rate systems for labour remuneration are introduced.
Inventory control techniques include ABC analysis, economic order quantity (EOQ), perpetual inventory system, review of slow and non-moving items, input-output ratio analysis, and setting various inventory levels. EOQ determines the optimal order quantity to minimize total inventory costs. Perpetual inventory involves continuously updating inventory records as items are received or used to prevent closing down for stocktaking. Input-output ratio analysis examines the relationship between raw materials used and final outputs. Setting inventory levels such as maximum, minimum, reorder helps maintain appropriate stock levels.
I. A biscuit manufacturing company buys 10,000 bags of wheat annually. The cost per bag is Rs. 500 and ordering cost is Rs. 400. Inventory carrying cost is estimated at 10% of wheat price. The number of orders to be placed during the year is calculated.
II. An automobile workshop's annual demand for shock absorbers is 4800 units. Unit price is Rs 300. Ordering cost is Rs 50. Storage cost is 3% annually and interest rate is 15%. The EOQ and number of orders are calculated.
III. Given data on normal usage, minimum usage, maximum usage and lead time for a component, reorder level, maximum inventory level and minimum inventory level are calculated.
Inventory management involves controlling the ordering, storage, and use of components and finished goods. It represents a major investment for businesses. [1] Techniques for effective inventory management include determining stock levels like reordering levels and minimum/maximum amounts based on consumption rates and lead times. [2] Safety stocks are amounts held above requirements to prevent stock-outs during lead times. [3] Economic order quantity models determine optimal order sizes by balancing ordering and carrying costs.
Inventory control in hospitals aims to efficiently order and store just the right amount of supplies needed for patient cases while tracking costs. It involves classifying inventory into official and unofficial categories. The objectives of inventory control are to supply materials on time, reduce idle time by avoiding stockouts, and meet future demand. Selective inventory control involves grouping inventory and applying different levels of control based on item costs and importance through various classification methods like ABC analysis.
This document discusses inventory management. It defines inventory as physical goods held by an organization awaiting use, processing, or sale. The purpose of holding inventory is to ensure continuous production and sales despite fluctuating demand. Effective inventory management aims to maintain optimal inventory levels to balance costs with avoiding stockouts. Tools for inventory management include determining stock levels, safety stocks, economic order quantity, ABC analysis, and inventory reports. The document also outlines different inventory ordering systems.
Material management deals with planning and controlling the flow of materials in a business. The objectives include minimizing material costs, procuring quality materials on time, and reducing surplus inventory. Key functions include purchasing, inventory control, shipping, and transportation. Inventory levels are determined by factors like order quantity, lead time, safety stock, and reorder point. Models like economic order quantity and material requirements planning aim to optimize inventory costs and meet production needs. ABC analysis categorizes inventory into A, B, and C classes based on annual consumption to focus control efforts.
Economic Order Quantity (EOQ) is the order quantity that minimizes total inventory costs. Total Inventory Costs Budgetary techniques for inventory planning
2. A-B-C. System of inventory control
3. Economic Order Quantity (E.O.Q.) i.e., how much to purchase at one time economically
4. VED Analysis
5. Perpetual inventory system and the system of store verification
6. Fixation of Stock Level
7. Control Ratios
The document discusses inventory management. It defines inventory and different types of inventory like raw materials, works-in-process, and finished goods. It also discusses reasons for holding inventory, different inventory measures, costs associated with inventory, and models for managing inventory like economic order quantity and reorder point.
The document discusses inventory management. It defines inventory and different types of inventory like raw materials, works-in-process, and finished goods. It also discusses reasons for holding inventory, different inventory measures, costs associated with inventory, and models for managing inventory like economic order quantity and reorder point.
This document discusses inventory management. It defines inventory and describes the variables involved in inventory problems including controlled variables like order quantity and timing, and uncontrolled variables like costs. It describes the objectives of inventory management as maintaining optimal inventory levels to maximize profitability. Different types of inventories like raw materials, work in progress, and finished goods are explained. The functions and importance of inventory management are provided along with methods like periodic review and fixed order quantity systems. The economic order quantity model and assumptions are outlined.
Main Java[All of the Base Concepts}.docxadhitya5119
This is part 1 of my Java Learning Journey. This Contains Custom methods, classes, constructors, packages, multithreading , try- catch block, finally block and more.
This document discusses concepts related to materials management and cost accounting. It defines key terms like cost, cost accounting, cost elements, and objectives of cost accounting. It describes different cost accounting techniques like bin cards, store ledgers, bills of materials, and stock valuation methods. It also discusses concepts of economic order quantity, reorder levels, and materials management techniques like ABC analysis. The purpose is to explain the process of materials management and cost accounting.
The document discusses inventory control model and concepts for effective supply chain management. It describes the types of materials needed in an industrial unit and importance of materials for plant operations. It then explains the inventory control model which operates based on minimum, maximum, reorder and average stock levels calculated using formulas. Factors influencing inventory control like consumption rate, order quantity, and lead time are also covered.
hey friends, we know from earlier research that material control is the major component of cost. so, let us have a look at few tenchniques relating to material control
This document defines inventory and discusses inventory control. It defines inventory as raw materials, work in progress, and finished goods. Inventory control aims to maintain optimal inventory levels for smooth operations. Inventories are classified and objectives of inventory control include avoiding over/under investment and providing the right goods at the right time. Operating objectives focus on availability, minimizing waste, and customer service, while financial objectives focus on costs. Inventory management aims to balance ordering costs, carrying costs, and stockout costs.
INVENTORY MANAGEMENT
TECHNIQUES OF INVENTORY CONTROL
ECONOMIC ORDERING QUANTITY (EOQ)
Maximum Stock Level
Minimum Stock Level
Danger Level
ABC ANALYSIS FOR VALUE OF ITEMS
Perpetual Inventory System
H.M.L. Classification
F S N Analysis
V.E.D. Classification
Just in Time (JIT)
Inventory Turnover Ratio
WORKING CAPITAL MANAGEMENT
RECEIVABLES MANAGEMENT
COSTS OF MAINTAINING RECEIVABLES
BENEFITS OF MAINTAINING RECEIVABLES
FACTORS AFFECTING THE SIZE OF RECEIVABLES
CREDIT PERIOD
OPTIMUM SIZE OF RECEIVABLES
DETERMINANTS OF CREDIT POLICY
OPTIMUM CREDIT POLICY
Credit standards
Credit terms
CREDIT EVALUATION
1. Inventory management involves determining appropriate inventory levels and replenishment policies to balance inventory holding costs, ordering costs, and the need to meet customer demand.
2. Key aspects of inventory management include classifying inventory items, determining economic order quantities, setting reorder points, and using periodic or continuous review systems.
3. The goals of effective inventory management are to provide good customer service while minimizing total inventory costs.
The document discusses various aspects of production management including definitions, objectives, and key functions. Production management aims to produce quality products according to specifications, on schedule, and at minimum cost. It involves planning and regulating the transformation of raw materials into finished goods. Key aspects of production management include material management, cost control, and operational management. Material management involves inventory control and purchase functions. Cost control focuses on labor and material costs. Effective production management is essential for business success.
This document provides an overview of material and labour cost control. It discusses material control techniques like ABC analysis, VED analysis, inventory levels, and economic order quantity. It describes the steps in material control like purchase requisition, selection of suppliers, and receipt of materials. Pricing methods for material issues like FIFO, LIFO, and average cost are explained. The document also covers labour cost elements like direct and indirect labour. It defines idle time and overtime, and discusses causes of idle time like administrative, productive and economic causes. Time rate and piece rate systems for labour remuneration are introduced.
Inventory control techniques include ABC analysis, economic order quantity (EOQ), perpetual inventory system, review of slow and non-moving items, input-output ratio analysis, and setting various inventory levels. EOQ determines the optimal order quantity to minimize total inventory costs. Perpetual inventory involves continuously updating inventory records as items are received or used to prevent closing down for stocktaking. Input-output ratio analysis examines the relationship between raw materials used and final outputs. Setting inventory levels such as maximum, minimum, reorder helps maintain appropriate stock levels.
I. A biscuit manufacturing company buys 10,000 bags of wheat annually. The cost per bag is Rs. 500 and ordering cost is Rs. 400. Inventory carrying cost is estimated at 10% of wheat price. The number of orders to be placed during the year is calculated.
II. An automobile workshop's annual demand for shock absorbers is 4800 units. Unit price is Rs 300. Ordering cost is Rs 50. Storage cost is 3% annually and interest rate is 15%. The EOQ and number of orders are calculated.
III. Given data on normal usage, minimum usage, maximum usage and lead time for a component, reorder level, maximum inventory level and minimum inventory level are calculated.
Inventory management involves controlling the ordering, storage, and use of components and finished goods. It represents a major investment for businesses. [1] Techniques for effective inventory management include determining stock levels like reordering levels and minimum/maximum amounts based on consumption rates and lead times. [2] Safety stocks are amounts held above requirements to prevent stock-outs during lead times. [3] Economic order quantity models determine optimal order sizes by balancing ordering and carrying costs.
Inventory control in hospitals aims to efficiently order and store just the right amount of supplies needed for patient cases while tracking costs. It involves classifying inventory into official and unofficial categories. The objectives of inventory control are to supply materials on time, reduce idle time by avoiding stockouts, and meet future demand. Selective inventory control involves grouping inventory and applying different levels of control based on item costs and importance through various classification methods like ABC analysis.
This document discusses inventory management. It defines inventory as physical goods held by an organization awaiting use, processing, or sale. The purpose of holding inventory is to ensure continuous production and sales despite fluctuating demand. Effective inventory management aims to maintain optimal inventory levels to balance costs with avoiding stockouts. Tools for inventory management include determining stock levels, safety stocks, economic order quantity, ABC analysis, and inventory reports. The document also outlines different inventory ordering systems.
Material management deals with planning and controlling the flow of materials in a business. The objectives include minimizing material costs, procuring quality materials on time, and reducing surplus inventory. Key functions include purchasing, inventory control, shipping, and transportation. Inventory levels are determined by factors like order quantity, lead time, safety stock, and reorder point. Models like economic order quantity and material requirements planning aim to optimize inventory costs and meet production needs. ABC analysis categorizes inventory into A, B, and C classes based on annual consumption to focus control efforts.
Economic Order Quantity (EOQ) is the order quantity that minimizes total inventory costs. Total Inventory Costs Budgetary techniques for inventory planning
2. A-B-C. System of inventory control
3. Economic Order Quantity (E.O.Q.) i.e., how much to purchase at one time economically
4. VED Analysis
5. Perpetual inventory system and the system of store verification
6. Fixation of Stock Level
7. Control Ratios
The document discusses inventory management. It defines inventory and different types of inventory like raw materials, works-in-process, and finished goods. It also discusses reasons for holding inventory, different inventory measures, costs associated with inventory, and models for managing inventory like economic order quantity and reorder point.
The document discusses inventory management. It defines inventory and different types of inventory like raw materials, works-in-process, and finished goods. It also discusses reasons for holding inventory, different inventory measures, costs associated with inventory, and models for managing inventory like economic order quantity and reorder point.
This document discusses inventory management. It defines inventory and describes the variables involved in inventory problems including controlled variables like order quantity and timing, and uncontrolled variables like costs. It describes the objectives of inventory management as maintaining optimal inventory levels to maximize profitability. Different types of inventories like raw materials, work in progress, and finished goods are explained. The functions and importance of inventory management are provided along with methods like periodic review and fixed order quantity systems. The economic order quantity model and assumptions are outlined.
Main Java[All of the Base Concepts}.docxadhitya5119
This is part 1 of my Java Learning Journey. This Contains Custom methods, classes, constructors, packages, multithreading , try- catch block, finally block and more.
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land.
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of any area. Consequently, a wide range of professionals, including earth system scientists, land
and water managers, and urban planners, are interested in obtaining data on land use and cover
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Remote Sensing and Geographic Information Systems
9
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Walmart Business+ and Spark Good for Nonprofits.pdfTechSoup
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Inventory Management.docx
1. INVENTORY MANAGEMENT
Inventory: it refers to stock, raw material, components, spares or work in progress maintained in an organization to have
continuous production and sales.
Inventory Management: Ensuring continues supply of raw materials is known as inventory management.
Objects of inventory management
To provide continuous supply of raw materials
To reduce wastages
To exploit the available opportunities
To provide right material at right price
To meet the demand in the market
To avoid excess inventory
To ensure effective utilization of the floor space.
Tools of Inventory Management
Fixation of Levels:
It is a tool through which the inventories are maintained by fixing different levels namely. Maximum level, Re-order
level, Minimum level and Danger level. Fixations of levels are made by considering different factors. Nature of raw materials,
cost, availability, lead time, storage space. The above factors will act as an indicator for managing the inventory.
Maximum Level:
it is the level set for materials beyond which it should not be stored. Maximum level is set by considering different
factors. Nature of raw materials, cost, availability, lead time, storage space. Materials stored beyond maximum level
create several financial and managerial problems to the firm.
Maximum Level = Re order Level +Re ordering Quality – (Minimum Consumption Minimum Re Ordering Period)
Minimum Level:
It is also known as safety stock, below which the storing of materials leads to server consequences. In other words,
it is a level at which stores controller takes immediate action in procuring the materials. Any negligence on the part of
the in charge of stores may lead to stoppage of production. This level is set by considering lead time, rate of
consumption and the nature of materials.
Minimum Stock Level = Re ordering Level – (Normal Consumption x Normal Reorder Period)
Re-order Level:
Re order level is that level fixed for the materials to indicate the urgency of procuring them from the market. This
level is fixed by considering the rate of consumption of materials, lead time and the availability of raw materials. Once
the materials reaches this level, stores controller place his request to purchase the materials. So that, he can maintains
storage of such items to maximum level.
Re order Level = Maximum Consumption x Maximum Reorder Period
2. Danger Level:
It is the level beyond which storage of materials should not fall. It also indicates the necessary to arrange for
quick purchases of materials. Otherwise, business firm has to stop the production of major plants. The stores in charge
may procure the materials even at the cost extra expenses and strain.
Danger Level = Average Consumption x Maximum Re order Period for emergency purchases.
ABC Analysis: (Always Better Control)
Under this method, the materials are managed by giving importance to its value. Classifications are made by
Grading the materials as A, B and C.
“A” Grade materials are costly high in value but less in number and are supervised and controlled closely.
“B” Grade materials are moderate in value and moderate numbers of such items are maintained
with moderate control.
“C” Grade materials are cheap in value but more in quantity and least attention is given in
monitoring these items. The main purpose of adopting this technique as a inventory control is to maintain scientific
investments.
Category Percentage of total items Percentage of total material cost
A 5-10 70-80
B 10-20 10-20
C 70-80 5-10
EOQ (Economic Order Quantity)
Economic Order Quantity is that quantity of materials to be ordered where it will have least or minimum order placing
and carrying cost. It is also called as the size of the materials to be purchased most economically.
the ordering cost or order placing costs consist of salary of the staff who are in charge of the ordering goods,
transportation costs, inspection costs, cost of stationary,typing,postage,telephone charges..,
Carrying cost refers to the cost of capital, cost of storage, insurance cost and cost of spoilage.., both these costs should
be maintained at minimum to order for a specific quantity of materials this can be calculated by using a formula
Perpetual Inventory System:
Referred as continuous stock checking. Under this system, different registered are maintained for materials, enteries are
made as and when the materials are received and issued. The physical verification of materials are conducted throughout
the year. Hence it is identified as a costly technique of inventory control. Though it is costly technique, the benefits
enjoyed by the management are many. Statement of materials, follow up action, monitoring .., can be smoothly carried
3. out. As a result of this benefit, many trading as well as manufacturing concercens are adopting this technique for
inventory management.
VED Analysis:
It is most suitable method for automobile industries specially to maintain spare parts. All spare parts are classified in to
vital, Essential and Desirable Components. Vital parts for the manufacturing of a product will be closely monitored.
Inadequate supply of these parts may substantially damage the productive activities.E type of materials is no doubt that
they are essential, but its level of stocks are moderately low. Desirable (D) components may or may not be
maintained.non availability of D type spares do not damage the normal functioning of the industry.
FSN Analysis:
Under this method, materials are grouped according to the movements. Fast moving items, slow moving items and non-
moving items. Fast moving items are stored in large quantity and close watches on the movement of such items are
kept. Slow moving items are not frequently needed by the production department; accordingly moderate quantity
supervision will be maintained.non moving items are rarely required by the production departments. Hence a smaller
number of materials are kept in stores and less importance is given in inventory management.
Periodical Inventory Evaluation:
Under this system inventory valuation with checking will be carried out at different intervels.generally twice or thrice
in a year. During the period of stocking, normal functioning of the organization will be closed for one or two days and
complete stock verification and valuation will be done accordingly. Most of the trading concerns adopt this technique
for their inventory management.
Cost Associated with Inventory
Financial Cost:(capital cost)
The finance required to purchase the inventory and the cost the company bears for mobilizing, it is known as
financial cost therefore adequate supply of finance at cheaper cost must be made available to maintain the inventory
Cost of Storage:
Inventories are to be stored properly by protecting the quality. The required for storing the inventory must be
adequately provided. This cost consists of the rent payable for storing the materials and maintenance of inventory cost
(insurance)
Price fluctuation:
Inventories are exposed to vide fluctuation in the prices. Many at time, the prices of materials may be redused.if
the price paid for procuring the materials are higher than the price that is prevailing; it is a loss to the business firm.
Risk of Obsolescence:
Due to the increased research and innovative and creative minds of technologies, new materials and products will
enter into the market. On such circumantances, the product manufactured today becomes obsolete.
Deterioration in quality:
In a practical situation, most of the materials stored may not be issued to production department for various
reasons. In the process, such material looses its quality or deteriorates itself from original value.
Theft, damage and accident:
4. The materials are stored in the warehouses. If it is exposed to different types of uncertainty, theft, damage and
fire accident all these are looses or increase the cost of production.
Inventory carrying cost :
It includes the expenses of maintance of stores, bins and the salary to the staff who are in charge of warehouses
or storage. Hence theses costs are to be reduced to increase the profitability of the firm.
Cost of Shortage of Stock and
Many at times, business firms may be able to arrange the adequate supply of materials regularly for various
reasons. as a result, production work may be stopped.therefore,sufficient care should be taken not to have this cost in
running the business.
Order placing cost:
Order placing cost is a permanent cost which is incurred by the business firm to place the order for materials, the
salary of the clerk, manger and establishment charges will also be considered in to managing the inventory.
Min-Max Method:
In the min-max method, each item of materials is fixed with its maximum and minimum levels. When the quantity
rewards minimum level, an order is placed for such a quantity as would make the inventory reach its maximum level.
Automatic Order System:
This method of inventory control is done with the help of computers. order for fresh purchases are placed when the inventory
reaches order point quantity (OPQ).for each type of material, records are maintained by data processing in the form of receipts
and issues. When the records show order point the staff concerned place order for necessary quantity. This system ensures that
materials are always promptly replaced.
Just In Time Inventory:
Business concerns are giving maximum attention to reducing stock levels by establishing cardial relationship with suppliers
to arrange for frequent delivery of quantities. This is called Just in Time Purchasiung.the objective of just in time purchasing is to
obtain delivery of materials immedidly before their use. This is possible with the co operation of the supplier. The company
guarantees to purchase large quantities. The supplier guarantees good quality materials at reasonable prices.this arrangement
helps in directly delivering the materials to the shop floor instead of receiving in to stores. Moreover the stocks consists of few
items at more or less same prices where LIFO, FIFOand average cost price will be the same.
Ordering Cycle Method:
In this method, the review of materials held in stock is done in a regular cycle. The length of cycle depends on the nature of
material. Materials which are expensive and essential have a shorter review cycle and non vital materials have longer review
cycle. At the time of review order is placed to bring the inventory to the desired level.
5. Ordering cycle method is also called 90-60-30 cycle method. The maximum stock level is equal to 90 days supply. When the
inventory reaches 60days supply, an order is placed for 30 days supply. The recorder point is equal to 60 days supply and
recorder quantity would be equal to 30days supply.
Inventory Turnover Ratio:
Input-Output Ratio Analysis:
Input output is the ratio of the actual quantity of material in production and standard material content of the actual
output. This is possible in industries where the product and raw material are being expressed in same quantitytative
measurement such as kilograms, metric tons,
The input –output ratio analysis indicates whether the consumption of actual material when compared with standard
is favorable or adverse. The raw material cost of the finished product can be arrived at by multiplying material cost per
unit by the input –output ratio.