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What Is Logistics Management?
What Is Logistics Management?
MAINTENANCE INVENTORY: These are inventories, which are not involved directly in the conversion process
but are necessary to manage an organization property, plant and equipment.
FUNCTIONS OF INVENTORY:
COSTS OF INVENTORY.
A company might carry inventory so as to:
Reduces cost of purchasing by increased order lots
And decreasing number of orders.
AVOID STOCK OUTS
Allow variability in supply time.
Provide for storage space for WIP
There are four main categories of cost associated with inventory.
Procurement costs
Out of stock
Costs
OUT OF STOCK COST: The costs incurred when a customer places, as order and order cannot be filled
from the inventory to which it is normally assigned.
They are further divided into two categories:
Lost sales costs.
Back order costs.
LOST SALES COSTS: These costs occur when the customer, faced with out of stock situation, chooses
to withdraw his order for the product. The cost id the profit that would have
been made if the sale gad occurred and cost of negative affects that the stock out
may have on future sales.
BACK ORDER COST: Back order costs that customer will wait for his order to be filled so that the
sales is not lost but only delayed. These create clerical and sales cost for order
processing additional, transport etc. That has to be occurred to fulfill these back
orders out of course of normal distribution channel.
CONCLUSION: Inventory control, production control and warehouse management are the