INVENTORY MANAGEMENT

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Rahul Sunda 110629

CONTENTS:- 1.INTRODUCTION 2.OBJECTIVE 3.IMPORTANT TERM USED IN INV.MNG. 4.PRESSURE FOR LOW &HIGH INVENTORY 5.TWO FORMS OF DEMAND 6.TYPES OF INVENTORY 7.CHALLANGES IN I.M.

8.TECTICS USED TO CONTROL INVENTORY 9.EOQ ANALYSIS 10.ABC ANALYSIS 11.INVENTORY CONTROL SYSTEM 12.P&Q SYSTEMS

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INVENTORY

Inventory is anything which can be store for future needs or demand, it can be in any form like man, machine, raw material, machine hours , finished goods etc.

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INVENTORY MANAGEMENT

Inventory management, is the planning and controlling of inventories in order to meet the competitive priorities of the organization, is an important concern for managers in all types of businesses.

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INTRODUCTION CONTINUED

Inventory control is concerned with achieving an optimum balance between two competing objectives.

1) Minimizing the investment in inventory.2) Maximizing the service levels to

customer’s and it’s operating departments.

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INVENTORY ACT AS A CUSHION

If Operation has full of problem , like labour absenteeism is high worker’s moral is also low , equipment working is not so good , logistic system is not so good , than also if a company has very excess amount of inventory , then no-one knows about these problem.

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OBJECTIVES

The specific objectives of inventory management are as follow:

a) Keeping the production on as on-going basis.b) Preventing idleness of men, machine .c) Utilizing of scare resources (capital) and

investment judiciously.d) Avoiding risk of loss of life (moral & social).e) Giving satisfaction to customers in terms of

quality-care, competitive price and prompt delivery.

f) Inducing confidence in customers and to create trust and faith.

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IMPORTANT TERM USED IN I.M.

Lot Size:- The quantity of an inventory item management either buys from a supplier or manufactures using internal processes

SKU:- An individual item or product that has an identifying code and is held in inventory somewhere along the supply chain.

Reorder Point:-it is that point where new order is placed & it is dependent on lead time

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PRESSURE FOR INVENTORY

A Manager consistently dealing with low and high inventory according to the nature of product, customer demand, supplier efficiency , lead time.

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PRESSURE FOR LOW INVENTORY

Cost of Capital:- (a) Opportunity cost (b) Total Holding Cost

Taxes Insurance Shrinkage Storage

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PRESSURE FOR HIGH INVENTORY

Customer Side Set up cost Ordering Cost Labour/equipment utilization Transportation Cost Payment to Suppliers

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TWO FORMS OF DEMAND Dependent

Demand for items used to produce final products and that is influence by other item.

Tires stored at a plant are an example of a dependent demand item.

Independent Demand for items used by external Customers , that don’t influence by other Item. EX. Cars, appliances, computers, and houses are examples of independent demand inventory.

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DEMAND CONTINUED

Independent Demand

A

B C

D E D F

Dependent Demand

Independent demand is uncertain. Dependent demand is certain.

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TYPES OF INVENTORY

By using the concept of what is order size and what is time between the order or lot size , Inventory are of 4 types:-

Cycle Inventory Anticipation Inventory Safety Inventory Pipe Line Inventory

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CYCLE INVENTORY Cycle inventory related with concept of LOT size , it is

that portion of inventory which varies directly with LOT size.

So it directly depends on cycle time or LEAD time(time between two orders)

Average cycle inventory(when demand rate is constant)=q+0/2=q/2

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CYCLE CURVE

Profile of Inventory Level Over Time

Quantityon hand

Q

Receive order

Placeorder

Receive order

Placeorder

Receive order

Lead time

Reorderpoint

Demand rate

Time

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SAFETY STOCK INVENTORY

Surplus Inventory that protects against uncertainties in demand , lead time ,and supply changes.

It also avoid customer service problems and in the emergency situation.

It achieve through two ways:- 1.before lead time order is placed. 2.more order is placed.

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ANTICIPATION INVENTORY

It is that part of Inventory which is held for meet in peak season demand , so this type of Inventory is intensely created because a certainty is there that it will consume in peak season.It also help when suppliers are threatened with a strike or have severe capacity limitations.

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PIPE LINE INVENTORY

Inventory that is created when an order for an item is issued but not yet placed in inventory.

It exists in the form of materials that move from supplier to a plant , from one operation to the next in the plant ,or plant to a customer, or from the distribution centre to a retailers.

Longer lead time or higher demand at a frequent time create more pipe line inventory.

pipe line inventory=d.L

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CHALLENGES IN I.M.

What is in the Stock ? What quantity of a single product is

available? Where it is being held ? So big retail chain stores like Walmart (U.S.A.) ,Tesco (U.K.), Carrefour(France) used RFIS System.

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