Erp Inventory Project

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    PREPARATION OF ERP INVENTORY MANAGEMENT

    Documentation

    On

    Preparation Of ERP Inventory Management

    Under the guidance of Prof. Anand Mohan

    By

    Rupam Dey

    MBA-00! Reg. "o.#0$$%0&0

    1

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    PREPARATION OF ERP INVENTORY MANAGEMENT

    Inde'

    Sl.

    No.

    Chapter Name Content Page No.

    1 Introduction Introduction,

    Objective, Motive

    4-

    ! "nal#$i$ Introduction, %h# it i$

    re&uired, %hat i$ '(P,

    )e# *eature$,

    Inventor#Management module

    divi$ion, (e&uired

    +ool$, Important

    method$

    -

    /e$ign Introduction,

    Specimen o* 0IN

    card, Store

    (e&ui$ition,Material

    +ran$*er, Material

    "nal#$i$, 2I3O, 3I3O,

    ood$ (eceived Note,

    Purcha$e Order and

    pro*e$$ional ver$ion

    o* a IN card and

    '.O.5. $#$tem6

    Image$

    7-8

    2

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    PREPARATION OF ERP INVENTORY MANAGEMENT

    4 Implementatio

    n

    Introduction, '**ective

    $ide$

    87-1

    8 /eci$ion Seven $tep$ !-

    ibilograph# 7

    3

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    PREPARATION OF ERP INVENTORY MANAGEMENT

    A()"O*+ED,EME"

    I hereb# ac9no:ledge that, I have completed the *ollo:ing

    project on ;Preparation O* '(P Inventor# Management S#$tem

    categor# item$ and their purcha$e $hould be underta9en at

    &uarterl# or hal*-#earl# interval$.

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    PREPARATION OF ERP INVENTORY MANAGEMENT

    .B'/ anal#$i$-

    +he B'/ anal#$i$ i$ mainl# made *or $pare part$. +he

    re&uirement and urgenc# o* $pare part$ i$ di**erent *rom that o*

    material. "--C anal#$i$ ma# not be properl# u$ed *or $pare

    part$. +he demand *or $pare$ depend$ upon the per*ormance o*

    the plant and machiner#. Spare part$ are cla$$i*ied a$ Bital HBD,

    '$$ential H'D, and /e$irable H/D. +he vital $pare$ $e mu$t *or

    running the bu$ine$$ the $moothl# and the$e mu$t be $tored

    ade&uatel#. +he non-availabilit# o* vital part$ :ill cau$e havoc

    in the concern. +he ' t#pe o* $pare are al$o nece$$ar# but their

    $toc9$ mu$t be 9ept at lo: level. +he $toc9ing o* / level part$

    can be avoid $ometime$. I* the lead time o* the$e $pare$ i$ le$$,

    then $toc9ing o* the$e $pare$ can be neglected.

    +he cla$$i*ication o* $pare$ under three categorie$ i$ animportant deci$ion. %rong cla$$i*ication o* an# $pare$ :ill

    create di**icultie$ *or production department. +he cla$$i*ication

    o* $pare$ $hould be le*t to the technical $ta** becau$e the# 9no:

    the need , emergenc#, u$age o* the $pare$.

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    PREPARATION OF ERP INVENTORY MANAGEMENT

    7.Inventor# +urnover (atio0

    Inventor# turnover ratio i$ calculated to indicate :hether

    inventor# have been u$ed e**icientl# or not. +he purpo$e i$ to

    en$ure the bloc9ing o* onl# re&uired minimum *und$ in

    inventor#. +he Inventor# +urnover (atio al$o 9no:n a$ Stoc9

    Belocit#. It i$ normall# calculated a$ $ale$Javerage inventor#

    co$t. Inventor# conver$ion period ma# be calculated to *ind the

    average time ta9en *or clearing the $toc9$.

    S#mbolicall#,

    Inventor# +urnover (atio Cost of goodssold

    Average Inventory Cost

    Or Net sales

    (Average )Inventory

    "nd Inventor# Conver$ion PeriodDaysa year

    Inventory turnover ratio

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    PREPARATION OF ERP INVENTORY MANAGEMENT

    ."ging Schedule o* Inventorie$0

    Cla$$i*ication o* inventorie$ to the period HageD o* their holding

    al$o help$ in identi*#ing $lo: moving inventorie$ thereb#

    helping in e**ective control and management o* inventorie$. +he

    *ollo:ing table $ho:$ aging o* inventorie$ o* a *irm.

    *#I+# SC,E'-E (! I+/E+T(RIES

    I+'M

    N"M'JCO/'

    "'

    C2"SSI3IC"+ION /"+' O3

    "C5KISI+ION

    "MOKN+ OF TOTAL

    LL1 L-18 da#$ Aune !8,

    !LL8

    LLLL 18

    LL! 1-L da#$ Aune 1L,

    !LL8

    LLLL L

    LL 1-48 da#$ Ma#

    !L,!LL8

    8LLLL !8

    LL4 4-L da#$ Ma# 8,

    !LL8

    4LLLL !L

    LL8 1 and above "pril 1!,

    !LL8

    !LLLL 1L

    33

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    PREPARATION OF ERP INVENTORY MANAGEMENT

    . Cla$$i*ication0

    +he companie$ are u$ing variou$ 9ind o* inventorie$ at a time in

    their production department. 3ini$hed good$ ma# be a t#pe,

    $pare$ ma# be a t#pe and etc. the inventorie$ $hould be cla$$i*ied

    and code number$ $hould be a$$igned *or their identi*ication.

    +he identi*ication or the $hort name i$ e$$ential not onl# *or the

    big companie$ or *irm but *or the $mall *irm$ al$o. 2ac9 o*

    proper cla$$i*ication mat lead to reduction in production.

    1L.Inventor# report$0

    3orm e**ective inventor# control management $hould be 9ept

    in*ormed :ith the late$t $toc9 po$ition o* di**erent item$. +hi$ i$

    u$uall# done b# preparing periodical inventor# report$. +hi$

    report $hould contain all in*ormation nece$$ar# *or managerial

    action. On the ba$i$ o* thi$ report manager ta9e$ deci$ion

    :henever nece$$ar#. +he more *re&uentl# thi$ report$ are

    prepared the le$$ :ill be the chance$ o* lap$e in the

    admini$tration o* inventorie$.

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    PREPARATION OF ERP INVENTORY MANAGEMENT

    11. 2ead +ime0

    2ead time period mean$ the lap$ bet:een the order time and the

    $uppl# time lap$. +here i$ a direct relation bet:een lead time

    and inventorie$. Suppo$e the lead time i$ o* one month, $o an#

    action ha$ ta9en to bring the material$ :ill ta9e a minimum o*

    one month. /uring thi$ time the inventor# mu$t be in hand a$

    con$uming department :ill have to be $erved *rom the inventor#

    held.

    1!. Perpetual Inventor# S#$tem0

    +he $toc9 ta9ing ma# either be done annuall# or continuou$l#.

    " $chedule i$ prepared to ta9e the $toc9 ta9ing *or the variou$

    $tore binH$tore roomD. One bin i$ $elected at random and the

    good$ are chec9ed a$ per $ho:n in the $tore ledger. +hen $ome

    other bin are $elected and done the $ame. +he per$onnel

    a$$ociated :ith $tore 9eeping are not told o* $toc9 ta9ing

    programme becau$e $tore room i$ cho$en randoml#. +he

    In$titute o* Co$t and Management "ccount$, 2ondon de*ine$

    perpetual inventor# $#$tem a$ ; a $#$temo* record$ maintainedb# the controlling department, :hich re*lect$ the ph#$ical

    movement$ o* $toc9$ and their current balance $ in Aapan, ho:ever K.S. companie$ $tarted

    u$ing thi$ techni&ue in 1L.

    "ccording to o**icial terminolog# o* C.I.M."., AI+, i$ ;a

    techni&ue *or the organi@ation o* :or9 *lo:$, to allo: rapid,

    high &ualit#, *leible production :hil$t minimi@ingmanu*acturing :or9 and $toc9 level

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    PREPARATION OF ERP INVENTORY MANAGEMENT

    S(MR (T,ER IMP(RT*+T MET,('S (!

    M*I+T*I+I+# I+/E+T(R0:

    +here have $ome method$ :ithout :hich the inventor#

    calculation i$ not complete. +he# are0

    "D3ir$t In 3ir$t Out.H3I3OD

    D2a$t In 3ir$t Out.H2I3OD

    CDSimple "verage Method.

    3I3O mean$ the inventor# enter$ *ir$t :ill be u$ing *ir$t to

    produce the product. It mean$ the date o* purcha$ing i$

    important here.

    2I3O mean$ the late comer inventor# :ill arrived *ir$t to the

    production department.In $imple average method *ir$t all the re&uired ra: material i$

    bought and then price are *ied a$ per their price average. "$ the

    average price ta9en the *ear o* lo$ing mone# i$ not their, their

    ma# not be pro*it but it i$ $ure that there i$ no lo$$.

    %ithout thi$ three method there have $ome other method$ li9e0

    ?ighe$t In 3ir$t method

    Net In 3ir$t Out method

    a$e Stoc9 method

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    PREPARATION OF ERP INVENTORY MANAGEMENT

    C?"P+'(

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    PREPARATION OF ERP INVENTORY MANAGEMENT

    %?"+ /O +?' /'SIN M'"NS0

    /e$ign mean$ ho: the competenc# o* a $#$tem $hould be *eel or

    under$tand b# a compan# or the *irm :ho :ill be demanding *or

    a Simple Inventor# $#$tem.

    In thi$ chapter :e are going to di$cu$$ about the proce$$ :e

    have de$cribed and di$cu$$ed $o *ar. I* one per$on $a#$ that he

    9no:$ the '.O.5. $#$tem *ormula but he doe$ not even 9no: thee**icienc# o* the *ormula then it :ill become good *or nothing.

    So *or u$ing the Simple Inventor# $#$tem thi$ i$ the mo$t u$e*ull

    portion.

    "$ :e have di$cu$$ed $o *ar all about the inventor#

    management mean$ ho: it can help one *irm and ho: the

    deci$ion :ould be ta9en on the ba$i$ o* the di**erent *ormula6no: it>$ the time to $ho: $ome practical *ield$ :here $uch 9ind

    o* application i$ needed.

    In thi$ chapter :e :ill be going to have $ome practical oriented

    problem$ and $earch *or the $olution in the net chapter. /uring

    thi$ :e :ill learn ho: to u$e '.O.5. and other $#$tem li9e 2I3O

    and 3I3O.

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    PREPARATION OF ERP INVENTORY MANAGEMENT

    SP'CIM'N O3 " IN C"(/0

    Simple Inventor#

    IN card

    Material0/$criptionQQ.. Maimum 2evelQQQ..

    CodeQQQQ.. Minimum

    2evelQQQ...

    Store 2edger 3olio NoQ.. Ordering 2evelQQQQ

    in No. QQQQQQQ... /anger 2evelQQQQ

    Normal 5uantit# o* Purcha$eQQ

    (eceipt$ I$$ue$ alance

    /ate .(.N.

    Or

    /ebit

    No.

    5uantit

    #

    /ate S.

    (e&.

    No.

    5uantit

    #

    /ate 5uantit

    #

    "udit

    Note$

    41

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    PREPARATION OF ERP INVENTORY MANAGEMENT

    +he $pecimen *orm o* a Store$ /ebit note$0

    RF 2td.

    3rom /epartmentQQQ Serial No. QQ

    Credit jobJ%or9 Order NoQ.. /ateQQQQ..

    Item

    No.

    /e$cription Code 5uantit# (ate Balue (emar9$

    Prepared

    b#QQQ

    "uthori@ed

    b#QQ

    (eceived

    b#QQQ

    in No. QQQQ.

    Store 2edger

    Co$t O**ice

    Priced b#QQQ

    Chec9ed

    b#QQQ

    42

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    PREPARATION OF ERP INVENTORY MANAGEMENT

    3olio...Store$ /ebit Note

    43

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    PREPARATION OF ERP INVENTORY MANAGEMENT

    +he $pecimen o* a $tore re&ui$ition0

    2ind:al 2td

    Store$ (e&ui$ition

    /epartmentQQQQ. No. QQQQ.

    Aob Proce$$QQQQ.. /ateQQQQ

    /e$criptio

    n

    Code 5uantit# (ate Balue (emar9$

    Prepared b#QQQ.

    "uthori@ed b#QQ..

    StoremanQQQQ.

    (eceived b#QQQ.

    in No. QQQQ

    Store 2edger

    3olioQQQQQ

    Co$t O**ice

    Priced b#QQQQ.

    Chec9ed b#QQQ..

    44

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    PREPARATION OF ERP INVENTORY MANAGEMENT

    +he $pecimen *orm o* a material tran$*er note i$ given belo:0

    "C 2td.

    Material +ran$*er Note

    3rom /epartmentQQQQ Aob NoQQ.Cr. Serial NoQQ

    +o /epartmentQQQQQ Aob NoQQ./r. /ateQQQQ

    /e$cription Code 5uantit# (ate Balue (emar9$

    Prepared b#QQQ..

    "uthori@ed b#QQQ.

    (eceived b#QQQQ. Co$t O**ice

    Priced b#QQQQChec9ed b#QQQ..

    45

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    PREPARATION OF ERP INVENTORY MANAGEMENT

    +he $pecimen o* a material anal#$i$ $heet i$ given belo:0

    /e#>$ 2td.

    Material "nal#$i$ Sheet

    %ee9 ending onQQQ.

    /ate (e&ui$ition

    No.

    +otal

    "mt.

    Aob$ Proce$$ Productio

    n

    Overhead7

    ($

    .

    74

    ($

    .

    78

    ($

    .

    7

    ($

    .

    1

    ($

    .

    !

    ($

    .

    ($

    .

    ($.

    +otal

    46

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    PREPARATION OF ERP INVENTORY MANAGEMENT

    " pro*e$$ional ver$ion o* in Card0

    1in Car"

    /e$cription0 Pigment$ in No.0

    S#mbol0R-4L Maimum 2evel0 8LLLL 9g.

    Knit0 )g. Minimum 2evel0 LLL 9g.

    Ordering 2evel0 !8LLL 9g.

    Ordered /ate (eceipt$ I$$ue$ alan

    ce

    (emar9$

    No.

    and

    /ate

    5uantit#

    H9g.D

    /ate

    (ecd.

    Challa

    n No.

    5uantit#H9

    g.D

    (e

    &.

    No.

    5uantit#

    H9g.D

    5uantit#

    18 L*

    1.4.L

    !

    1LLL

    L

    .4.L

    !

    "pril

    .

    1

    !

    !

    4

    7

    1

    4

    LLLL

    1LLLL

    1

    !

    4

    8

    1LLL

    !LLL

    1LLLL

    8LLL

    8LL

    48LL

    !8LLL

    1!LLL

    1LLLL

    4LLLL

    LLLL

    !8LLL

    !48LL

    48LL

    LLLL

    Shortage

    .4.L! (e$erved

    Aob

    No

    5t#

    H9g.D

    /ate

    i$$ue

    d

    47

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    PREPARATION OF ERP INVENTORY MANAGEMENT

    " ver# important role in the inventor# management $#$tem i$

    plated b# the 3I3OH3ir$t In 3ir$t 3ir$t OutD and 2I3OH2a$t In

    3ir$t OutD method. elo: :e are tr#ing to $ho: a *orm o*

    trading account that ho: thi$ t:o method can help to de*ine

    pro*it0

    Particular$ 3I3O 2I3O %eighte

    "verage

    Sale$0 !8L Tr$. 4 1LLL

    8L Tr$. 7L !48LL

    1LL Tr$. 74 74LL

    Opening Stoc9

    Purcha$e0

    1LL Tr$. 41 41LL

    !LL Tr$.8L 1LLLL

    4LL Tr$. 81.78 !L78L

    2e$$0 Clo$ing Stoc9

    Co$t o* ood$ Sold

    47LL 47LL 47LL

    LL

    48L

    LL

    48L

    LL

    48L

    78L

    817

    78L

    LL

    78L

    8LLL

    8 48L 78L

    48

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    PREPARATION OF ERP INVENTORY MANAGEMENT

    ro$$ Pro*itHSale$ U Co$t o* good$

    $oldD

    14 1L8L 1418L

    " pro*e$$ional ver$ion o* u$ing '.O.5.0

    2et *irm ha$ *ollo:ing problem$

    Ordering &uantitie$ Price per 9g Hr$.D

    2e$$ than 8LL8LL but le$$ than 1LL

    1LL but le$$ than 4LLL

    4LLL but le$$ than LLL

    LLL and above

    1!.LL11.L

    11.L

    11.4L

    11.!L

    +he annual re&uirement *or the material i$ LLL 9g. +heordering co$t per order i$ r$. 1! and the $toc9 holding co$t i$

    e$timated at !LV o* material co$t per annum. It i$ re&uired to

    compute the mo$t economical propo$e the *irm $hould accept$.

    /uring our di$cu$$ion on the previou$ chapter on page no. ! :ehave $een ho: to calculate the 'conomic Order 5uantit#. #

    u$ing the method no: :e can calculate the be$t economic order

    :hich can be placed. ?ere :e *ound the e**icienc# o* Simple

    Inventor#WWWWWWWWWWWWWWWWWWWW

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    PREPARATION OF ERP INVENTORY MANAGEMENT

    Computation of most economical or"ering 2uantity

    DOrdering &uantit# $i@eH9gD

    DNumber o* Order$

    Order

    Annual Requirement

    D"verage Inventor#X9gY

    DBalue o* average inventor#

    H"verage inventor# PriceD

    4LL

    !L

    !LL

    !4LL

    8LL

    1

    !8L

    !8L

    1LL

    8

    LL

    !L

    4LLL

    !

    !LLL

    !!LL

    LLL

    1

    4LLL

    44LL

    D"nnual total co$t0 ($. ($. ($. ($. ($.

    aDCo$t o* Material

    bDOrdering co$tHNo.o* order$ 1!D

    cDCarr#ing co$tH!LV o* value o*verage inventor#D

    +otal annual co$tHabcD

    LLL

    !4L

    4L

    44LL

    1!

    8L

    1!LL

    L

    18

    !LL

    !4

    48L

    LL

    1!

    L

    7!L 81! 471 874 87!

    51

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    PREPARATION OF ERP INVENTORY MANAGEMENT

    +he $pecimen o* a good$ received i$ given belo:0

    RF 2td.ood$ (eceive Note

    3romQQQQ

    No. QQQQQQ.

    /ateQQQQQQ

    /eliver# Note No .J Challan No. QQQItem /e$cription Code

    No.

    Purcha$e

    Order

    No.

    5uantit#

    Ordered

    5uantit#

    (eceived

    5uantit#

    (ejected

    Net

    5uantit#

    received

    (ate Balue (emar9$

    +ran$port ill No. Store$

    2edger

    "ccount$ (e*erence In$pection

    done b#

    52

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    PREPARATION OF ERP INVENTORY MANAGEMENT

    +he $pecimen *orm o* a purcha$e order i$ given belo:0

    /e#>$ 2td.Purcha$e Order

    +o,

    MJ$. QQQQ..Hname o* $upplier$D No. QQ

    /ateQQQ.

    (e*erence No. QQQ..

    Purcha$e (e&ui$ition NoQ.

    /ear $ir,

    Four o**er contained in #our &uotation No. Q./atedQ.. i$

    hereb# accepted. Plea$e $uppl# the *ollo:ing material$ a$ per the

    term$ and condition mentioned over lea*0

    Ite

    m

    No.

    Cod

    e

    No.

    /e$criptio

    n

    5uantit

    #

    (at

    e

    Balue /eliver

    # /ate

    (emar9

    $

    53

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    PREPARATION OF ERP INVENTORY MANAGEMENT

    'i$e dut#Sale$ +a

    /i$count allo:ed

    Pac9age Charge

    Pac9age to be credited on return Purcha$e

    managerJmanager

    Carriage on /eliver# *or /e#>$ 2td.+erm$ on pa#ment

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    PREPARATION OF ERP INVENTORY MANAGEMENT

    No: there have $ome image$ u$ed in compan# to maintain the

    inventor#0

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    PREPARATION OF ERP INVENTORY MANAGEMENT

    +hi$ belo: *orm i$ to about the billing o* a compan#0

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    PREPARATION OF ERP INVENTORY MANAGEMENT

    +he belo: image i$ $ho:ing a $o*t:are *or maintaining

    inventor#0

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    PREPARATION OF ERP INVENTORY MANAGEMENT

    +hi$ *orm i$ about to collect data about the per$on :ho bu#$ or

    hold$ or re$pon$ible *or inventor#0

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    PREPARATION OF ERP INVENTORY MANAGEMENT

    +he *ollo:ing $ho:$ the :a# in :hich inventor# record$ are

    9ept in a *irm0

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    PREPARATION OF ERP INVENTORY MANAGEMENT

    +he *ollo:ing *orm are u$ed :hen an# project$ are under ta9en0

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    C?"P+'(

    4

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    +hrough out the $e$$ion :e have di$cu$$ed a proper inventor#

    management :hich i$ mea$ure o* a good compan#. +he

    compan# :hich can maintain it$ inventor# properl# can achieve

    a great $ucce$$ in their bu$ine$$. +he be$t concept o*

    implementing inventor# management $#$tem i$ co$t

    minimi@ation and pro*it maimi@ation.

    8ee! the /y/tem 3a/ de/igned /o that 3hen

    materia/ hit the /afety /toc1 eve! it 3a/ time to

    reorder. De/pite information in the /y/tem that

    very ceary aert/ u/er/ that it i/ time to reorder 2y

    /aying 9"O*:9 again 3hen it i/ time to reorder!

    there 3ere /ti i//ue/ regarding the actua

    reordering. here 3a/ even a countdo3n 2y the

    /y/tem that ao3/ u/er/ to 1no3 ho3 many day/

    they have eft unti they have to reorder. It 3a/

    reay 5uite cear.

    8o a/ per the practica pro2em/ in managing thi/

    1ind of /ituation the thing i1e E.O.;. can hep me a

    ot. One important thing i/ that no3 a day/ in the

    era of internet the data can 2e /end through

    EDI

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    +he *actor$ that prevent improvement$ in the inventor#

    management $#$tem are not u$uall# related to the '(P $o*t:are

    tool$ that are purcha$ed and implemented, but rather to the :a#

    the compan# i$ organi@ed and managed. (eduction in inventor#

    re&uire$ bu$ine$$ proce$$ change--and it i$ at that point that

    organi@ational $tructure, emplo#ee$, and the internal audit

    department come into pla#.

    Inventor# i$ the mo$t di**icult :or9ing capital component tomanage becau$e man# o* the contributing Eo:ner$E that a**ect it

    are cro$$-*unctional. ecau$e no $ingle *unctional area o:n$ the

    inventor# proce$$, the involvement o* the internal audit

    department i$ li9el# to be valuable.

    +he techni&ue o* inventor# proportionalit# i$ mo$t appropriate

    *or inventorie$ that remain un$een b# the con$umer. "$ oppo$ed

    to E9eep *ullE $#$tem$ :here a retail con$umer :ould li9e to $ee

    *ull $helve$ o* the product the# are bu#ing $o a$ not to thin9 the#

    are bu#ing $omething old, un:anted, or $tale6 and di**erentiated

    *rom the Etrigger pointE $#$tem$ :here product i$ reordered

    :hen it hit$ a certain level6 inventor# proportionalit# i$ u$ed

    e**ectivel# b# ju$t-in-time manu*acturing proce$$e$ and retail

    application$ :here the product i$ hidden *rom vie:.

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    PREPARATION OF ERP INVENTORY MANAGEMENT

    +here are $ome e**ective $ide$ o* implementation0

    2e$$ ri$9 and le$$ co$t$.

    Capital Co$t

    Storage and ?andling Co$t

    (i$9 o* price decline

    (i$9 o* ob$ole$cence

    (i$9 deterioration in &ualit#

    5uic9 calculation o* clo$ing $toc9

    ?elp*ul in *ormulating purcha$e policie$

    Chec9 on $tore$ per$onnel

    ?elp*ul in production planning

    Inve$tment$ under chec9

    'rror$ and $hortage are ea$il# declared

    Increa$ing e**icienc# o* Organi$ation

    +he right &uantitie$ o* material$ are purcha$ed or produced

    at the right time

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    PREPARATION OF ERP INVENTORY MANAGEMENT

    Inve$tment in inventor# are reduced

    %a$te$ are eliminated

    Carr#ing and holding co$t o* inventor# reduced a$ becau$e

    o* le$$ inventor#

    (eduction in co$t o* &ualit# $uch a$ in$pection, co$t o*

    dela#ed deliver#, earl# deliver#, proce$$ing document$ etc.

    re$ulting into overall reduction in co$t.

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    C?"P+'(8

    67

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    68

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    PREPARATION OF ERP INVENTORY MANAGEMENT

    '**ective internal audit a$$e$$ment$ o* compan# inventor#

    management $#$tem$ can be de*ined b# a $even-$tep proce$$.

    1. Obtain management commitment. Management mu$t clearl#communicate the compan#G$ vi$ion, $trateg#, and $hort- and

    long-term goal$ and objective$. Man# *unctional area$ impact

    inventor#, #et no one *unctional area o:n$ the inventor#

    proce$$. +o improve the inventor# management $#$tem, $enior

    management mu$t lead the :a#6 be highl# vi$ible6 communicate

    clearl#6 and deliver *ocu$ed, *ull-time leader$hip.

    !. /evelop proce$$ objective$ and deplo# the team. +he internal

    audit department $hould identi*# an internal audit repre$entative

    and a repre$entative *rom each *unctional area, including $ale$

    and mar9eting, engineering, purcha$ing, planning and

    production, and *inance and co$t accounting.

    Once the team *or each *unctional area ha$ been e$tabli$hed, the

    group $hould determine proce$$ objective$, mile$tone$, and due

    date$. "n illu$tration o* t#pical proce$$ objective$ b# *unctional

    area can be$t be de$cribed in the EBalue ChainE $ection o* the

    EInventor# ManagementE chart on page$ 4!-4.

    . Identi*# the proce$$. +he team $hould identi*# and evaluate allthe inventor#-related activitie$ :ithin the *unctional area.

    enchmar9 data $hould then be ac&uired *or all 9e# proce$$e$ or

    activitie$, and compari$on$ $hould be made bet:een current

    activitie$ and tho$e o* the Ebe$t in cla$$

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    PREPARATION OF ERP INVENTORY MANAGEMENT

    4. /e*ine the proce$$. +eam member$ $hould *amiliari@e

    them$elve$ :ith the proce$$e$ that a**ect inventor# *or each

    *unctional area. +he team $hould then diagram the proce$$ and

    document it$ impact on the compan#G$ inventor#. 'ver# $tep o*

    the proce$$ $hould be included. Stic9# note$ on a :all ma# be a

    u$e*ul tool *or creating the diagram.

    8. Mea$ure the proce$$. +he team $hould de*ine per*ormance

    mea$urement$ ba$ed on 9no:ledge gathered in $tep$ and 4.

    Per*ormance mea$urement$ act a$ agent$ o* change6 a$ the old

    $a#ing goe$, E%hat get$ mea$ured, get$ done.E Kn*ortunatel#,

    man# companie$ have *ar too man# per*ormance mea$ure$ and

    *ar too *e: that are relevant to their $trateg#. Pour 9e# ground

    rule$ $hould de*ine per*ormance mea$urement$0

    Z "cce$$ibilit#0 +he data re&uired mu$t be readil# available.

    Z Simplicit#0 +he per*ormance driver mu$t be under$tandable.

    Z (elevance0 +he per*ormance driver mu$t $upport the de*ined

    $trateg# and mu$t be actionable. It mu$t be tied to the $trategic

    goal and not $impl# applied :ithin a *unctional area. Can it pa$$

    the E$o :hatE &ue$tion to get to the net level

    Z (eliabilit#0 +he per*ormance driver mu$t be predictable. Can it

    be in*luenced b# uncontrollable *actor$ Per*ormance

    mea$urement$ $hould al$o0

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    Z Provide manager$ and emplo#ee$ :ith critical in*ormation

    about e**icienc# and e**ectivene$$ o* bu$ine$$ operation$.

    Z Serve a$ a *oundation *or continuou$ improvement initiative$.

    Z e valid and $tati$tical.

    Z e tied to compen$ation.

    . "$$e$$ *or improvement. +he team $hould evaluate the re$ult$

    o* the *unctional proce$$ revie:$ and determine a rough order

    magnitude *or potential inventor# reduction and increa$ed

    operational e**iciencie$.

    7. Communicate the re$ult$. +he team $hould communicate the

    re$ult$ o* the *unctional revie: to each *unctional area manager

    and re&ue$t *eedbac9 on the a$$e$$ment. +he internal audit

    department ma# then con$olidate the a$$e$$ment re$ult$ *romeach *unctional area and prepare a con$olidated operational

    report :ith a recommended action plan to upper management.

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    II2O("P?F

    /K(IN MF /OCKM'N+"+ION +?' 3O22O%IN SI+'S

    "N/ +?' CON+'N+S ?'2P M' " 2O+0

    1. E http0JJ*indarticle$.comJpJarticle$JmiWm418Ji$WW87JaiW7874J

    !. http0JJ:::.ro$eindia.netJblogJ!LLJL1JL4Jerp-inventor#-

    managementJ

    . http0JJen.:i9ipedia.orgJ:i9iJInventor#

    4. http0JJ:::.google.co.inJimage$hlen=gbv!=tb$i$ch

    V"1=$a1=&inventor#management*orm=a&*=a&i=a&l=o&=g$Wr*ai=$tartL

    8. 3IN"NCI"2 M"N"'M'N+ b# Sha$hi ). upta, (.).

    upta, Neeti upta.H)al#ani PublicationD

    http://findarticles.com/p/articles/mi_m4153/is_6_57/ai_69759746/http://www.roseindia.net/blog/2008/01/04/erp-inventory-management/http://www.roseindia.net/blog/2008/01/04/erp-inventory-management/http://en.wikipedia.org/wiki/Inventoryhttp://www.google.co.in/images?hl=en&gbv=2&tbs=isch%3A1&sa=1&q=inventory+management+form&aq=f&aqi=&aql=&oq=&gs_rfai=&start=0http://www.google.co.in/images?hl=en&gbv=2&tbs=isch%3A1&sa=1&q=inventory+management+form&aq=f&aqi=&aql=&oq=&gs_rfai=&start=0http://www.google.co.in/images?hl=en&gbv=2&tbs=isch%3A1&sa=1&q=inventory+management+form&aq=f&aqi=&aql=&oq=&gs_rfai=&start=0http://www.roseindia.net/blog/2008/01/04/erp-inventory-management/http://www.roseindia.net/blog/2008/01/04/erp-inventory-management/http://en.wikipedia.org/wiki/Inventoryhttp://www.google.co.in/images?hl=en&gbv=2&tbs=isch%3A1&sa=1&q=inventory+management+form&aq=f&aqi=&aql=&oq=&gs_rfai=&start=0http://www.google.co.in/images?hl=en&gbv=2&tbs=isch%3A1&sa=1&q=inventory+management+form&aq=f&aqi=&aql=&oq=&gs_rfai=&start=0http://www.google.co.in/images?hl=en&gbv=2&tbs=isch%3A1&sa=1&q=inventory+management+form&aq=f&aqi=&aql=&oq=&gs_rfai=&start=0http://findarticles.com/p/articles/mi_m4153/is_6_57/ai_69759746/