This document discusses inventory control and recent trends in production planning and control (PPC). It defines inventory and different types of inventory classified based on material flow and nature of use. It also discusses the purpose of holding stock, inventory control including economic order quantity model, and inventory decision parameters for Q and P models. Recent trends covered include applications of computers in PPC, computerized PPC systems, just-in-time production, kanban production control, manufacturing resource planning (MRP II), enterprise resource planning (ERP) and its modules.

1. INVENTORY CONTROL
AND
RECENT TRENDS IN PPC
UNIT - 5

2. INVENTORY
 Inventory is a stock of an item or ideal
resource held for future use.
INVENTORY DEFINED
 The term inventory includes
1) raw material
2) In processed finished package
3) Other stocks

3. TYPES OF INVENTORY
 CLASSIFICATION BASED ON MATERIAL
FLOW:
1. Raw material inventories
2. Brought out parts inventories
3. Work in process inventories
4. Finished goods inventories
5. MRO INVENTORIES (Maintenance, Repair,
Operation)

4.  CLASSIFICATION BASED ON NATURE
OF USE:
1. Anticipation inventories (expected demand)
2. Fluctuation inventories ( Avoid risk)
3. Lot size inventories ( large lots to get discounts)
4. Transportation inventories (one place to another)

5. PURPOSE OF HOLDING STOCK
1. To maintain independence of operations
2. To meet variation in product demand
3. To allow flexibility in production scheduling
4. To provide safe guard of raw materials
5. To take advantages of price discounts
6. To utilize the advantage of price fluctuations
7. To prevent loss of orders

6. INVENTORY CONTROL
 Scientific method for what to order, when to
order, how much to order, how much to stock.
INVENTORY DECISIONS:
1. HOW MUCH (order quantity)
2. WHEN TO REPLISH (order level)
FUNCTIONS OF INVENTORY CONTROL:
1. Effective running of the stores
2. Technology responsibilities
3. Stock control system

7. OBJECTIVE OF INVENTORY CONTROL
1. To ensure Continuous supply of materials.
2. To maintain overall investment
3. To minimize holding and replacement
shortage
4. To keep in active , waste at minimal level
5. To supply of product , raw materials
regurarly.

8. WHAT ARE INVENTORY COSTS?
1. ORDERING COSTS
2. CARRYING COSTS (HOLDING COSTS)
3. SHORTGE (OR STOCK OUT) COSTS
4. PURCHASE COSTS

9. TERMS USED IN INVENTORY CONTROL
1. Demand
2. Order cycle
3. Lead time
4. Re order level
5. Safety or buffer stock
6. Re order quantity

10. ECONOMIC ORDER QUANTITY
 Amount of quantity produced during one
production cycle is known as order quantity.

11. ASSUMPTIONS OF THE BASIC EOQ
FORMULA
 Demand and lead time are known and constant
 Purchase cost do not vary with ordered quantity
 Ordering and carrying costs include relevant
costs
FORMULA:

12. TYPES OF INVENTORY SYSTEMS
 TWO GENERAL TYPES OF INVENTORY
SYSTEMS.
 FIXED ORDER QUANTITY MODEL (Q-model)
 FIXED TIME PERIOD MODELS (P-model)

13. 13
Q- MODEL
Demand
rate
0 Time
Lead
time
Lead
time
Order
Placed
Order
Placed
Order
Received
Order
Received
Inventory
Level
Reorder point, R
Order qty, Q

15. INVENTORY DECISION PARAMETERS
FOR Q- MODEL
1. Re- order quantity (how much to order)
2. Re –order level (when to order)
RE- ORDER LEVEL = SAFETY STOCK +
LEAD TIME CONSUMPTION

16. P-MODEL
 In the fixed time p-model periodic system,
periodic review system.

18. INVENTORY DECISION PARAMETER
FOR P- MODEL
1. Re- order level (when to order)
2. Re –order quantity (how much to order)
RE- ORDER QUANTITY = MAXIMUM STOCK --
STOCK ACTUALLY HELD AT
THE TIME OF REVIEW

19. Q- MODEL vs P- MODEL

20. EFFECT OF DEMAND ON INVENTORIES
 STAGE-I- producing components from raw
materials
 STAGE-II – producing minor components
from components
 STAGE-III – producing major assemblies
from components
 STAGE-IV – assembling the final product

21. VARIOUS INVENTORY CONTROL
TECHNIQUES
 Various inventory control otherwise called as
selective inventory control.
 selective inventory control refers to the
variation in method of control in item to item
on some selective basis

22. SELECTIVE INVENTORY CONTROL
TECHNIQUES
1. ABC ANALYSIS- Always , Better, Control analysis
2. VED ANALYSIS – Vital , Essential, Desirable analysis
3. HML ANALYSIS- High, Medium, Low analysis
4. FSN ANALYSIS- fast moving , Slow moving, Non
moving analysis
5. SOS ANALYSIS- Seasonal, Off-Seasonal analysis
6. GOLF ANALYSIS- Government, Ordinary, Local,
Foreign analysis
7. XYZ ANALYSIS
8. BAR CODE ANALYSIS

23. ABC ANALYSIS
 Categorizing inventories according to quantity
and value
 ABC analysis is based on the Pareto principle

24. PROCEDURE FOR ABC ANALYSIS
1. Identify all the items being used list them and
estimate the annual consumption
2. Collect cost data for individual items
3. Find out annual usage or consumption in
rupees
4. Arrange in descending order (annual usage)
5. Calculate cumulative annul usage express in
the percentage of total annual usage.
6. Plot cumultive usage percentage against
cumulative item percentage and segerate in to
A,B,C

25. RECENT TRENDS IN PPC
APPLICATIONS OF COMPUTERS IN PPC:
1. Plant logistics
2. Cost accounting
3. Estimation
4. Quality management
5. Simulation
6. Scheduling
7. Etc,.

26. COMPUTERISED PRODUCTION AND
PLANNING AND CONTROL
1. Product structure processer
2. Material requirement
3. Product costing system
4. Inventory management system
5. Master production scheduling system
6. Capacity planning system
7. Shop floor control and monitoring system

27. JUST IN TIME PRODUCTION SYSTEM
 JIT is a management philosophy
 Eliminate sources of manufacturing waste
 Right part in the right place in the right time.
 OTHER NAMES:
 Short cycle manufacturing
 Stockless production
 Zero inventory manufacturing

28. OBJECTIVES OF JIT
1. Zero defects
2. Zero inventories
3. Zero setup time
4. Zero breakdowns
5. Zero handling
6. Zero lead time
7. Lot size

29. SEVEN WASTES OF JIT
1. Waste of over production
2. Waste of waiting
3. Waste of transportation
4. Waste of process itself
5. Waste of stock
6. Waste of motion
7. Waste of making defective products

30. JIT ELEMENTS
1. TECHNOLOGY MANAGEMENT
2. PEOPLE MANAGEMET
3. SYSTEMS MANAGEMENT

31. JIT manufacturing

32. KANBAN PRODUCTION CONTROL
SYSTEM
 TWO MAIN TYPES OF KANBAN:
1. Production kanban (P-kanban)
 It signals need to produce more parts
2. Transport kanban (T-kanban or move kanban)
 It signals need to deliver more parts to the
next work centre

33. TWO CARD KANBAN

34. MANUFACTURING RESOURCE
PLANNING (MRP-II)
 MRP-II represents the natural evolution of
closed loop MRP (Material Requirement
Planning)
 FUNCTIONS OF MRP:
1. Management planning
2. Customer services
3. Operations planning
4. Operations execution
5. Financial functions

35. MRP – II STRUCTURE

36. ENTERPRISE RESOURCE
PLANNING
 ERP is a new system concept every enterprise
function is integrated with a flow of
information
 ERP Vs MRP-II
 ERP has a technical requirements such as graphical
user interface, database , fourth generation
language, etc,.

37. INFORMATIONS
REQUIREMENTS OF ERP
1. Sales customer order demand relation ship
2. Manufacturing resource data
3. Inventory status data
4. Manufacturing process information
5. Customer information
6. Customer satisfaction information
7. Vendor and supply chain detail data

38. ENTERPRISE RESOURCE PLANNING

39. IMPLEMENTATION OF ERP
1. Identify the needs of ERP implementation
packages
2. Evaluating the existing business situation
3. Make decisions on regarding situations
4. Re engineer business process to achieve desired
results
5. Evaluate the various available ERP packages
6. Choose suitable ERP package
7. Install
8. Finalise

40. MODULES OF ERP
1. Finance module
2. Manufacturing module
3. Distribution module
4. Service module
5. Transportation module
6. Process module
7. Project module
8. Tools module
9. Other modules