BY-

ABHIGYAN SHARMA
URVI MANGAL
TRIDHA SURANA
TANISHA AGARWAL
 INVENTORY MANAGEMENT
 Inventory management is the supervision of non-
capitalized assets (inventory) and stock items.
 A component of supply chain management, inventory
management supervises the flow of goods from
manufacturers to warehouses and from these facilities
to point of sale.
 A key function of inventory management is to keep a
detailed record of each new or returned product as it
enters or leaves a warehouse or point of sale.
 INVENTORY MANAGEMENT
PROCESS
 Inventory management is a complex process, particularly
for larger organizations, but the basics are essentially the
same regardless of the organization's size or type.
 In inventory management, goods are delivered into the
receiving area of a warehouse in the form of raw materials
or components and are put into stock areas or shelves.
 Inventory management uses a variety of data to keep track
of the goods as they move through the process, including
lot numbers, serial numbers, cost of goods, quantity of
goods and the dates when they move through the process.
 INVENTORY MANAGEMENT
SOFTWARE SYSTEMS
Inventory management software systems generally began
as simple spreadsheets that tracked the quantities of goods
in a warehouse, but have become more complex. Inventory
management software can now go several layers deep and
integrate with accounting and ERP systems. The systems
keep track of goods in inventory, sometimes across several
warehouse locations. The software also calculates the costs
-- often in multiple currencies -- so that accounting
systems always have an accurate assessment of the value of
the goods.
Some of the software are– QuickBooks, SAP Business One,
Odoo, Microsoft’s Dynamic’s GP.
 INVENTORY CONTROL
 The term inventory means the value or amount of materials
or resource on hand. It includes raw material, work-in-
process, finished goods and stores and spares.
 Inventory Control is the process by which inventory is
measured and regulated according to predetermined
norms such as economic lot size for order or production,
safety stock, minimum level, maximum level, order level
etc.
 Inventory control pertains primarily to the administration
of established policies, systems and procedures in order to
reduce the inventory cost.
 OBJECTIVES OF INVENTORY
CONTROL
 To meet unforeseen future demand due to variation in
forecast figures and actual figures.
 To average out demand fluctuations due to seasonal or
cyclic variations.
 To meet the customer requirement timely, effectively,
efficiently, smoothly and satisfactorily.
 To smoothen the production process.
 To facilitate intermittent production of several
products on the same facility.
 To gain economy of production or purchase in lots.
 To reduce loss due to changes in prices of inventory
items.
 To meet the time lag for transportation of goods.
 To meet the technological constraints of production/
process.
 To balance various costs of inventory such as order cost
or set up cost and inventory carrying cost.
 To balance the stock out cost/ opp0rtunity cost due to
loss of sales against the cost of inventory.
 To minimize losses due to deterioration, obsolescence,
damage, pilferage etc.
 To stabilize employment and improve lab our realtions
by inventory of human resources and machine efforts.
 FACTORS AFFECTING INVENTORY
CONTROL
 Type of product
 Type of manufacture
 Volume of production
BENEFITS OF INVENTORY CONTROL
 Ensures an adequate supply of materials
 Minimizes inventory costs
 Facilitates purchasing economies
 Eliminates duplication in ordering
 Better utilization of available stocks
 Provides a check against the loss of materials
 Facilitates cost accounting activities
 Enables management in cost comparison
 Locates and disposes inactive and obsolete store items
 Consistent and reliable basis for financial statements
 NATUTRE OF INVENTORY
 Dependent demand- Demand for one product is
linked with demand for another product, such as
components, subassemblies etc.
 Independent demand- Demand for a product/ service
occurs independently of demand for any other product
or service, such as finished product, service parts,
lubricants, cutting oil, greases, preservatives etc.
 TYPES OF INVENTORY COSTS
 Ordering (purchasing) costs
 Inventory carrying (holding) costs
 Out of stock/ shortage costs
 Other costs
 ORDERING COSTS
 It is the cost of ordering the item and securing its
supply.
 It includes-
 Expenses from raising the indent
 Purchases requisition by user department till the execution of
order
 Receipt and inspection of material
 INVENTORY CARRYING COSTS
 Costs incurred for holding the volume of inventory
and measured as a percentage of unit cost of an item.
 It includes-
 Capital cost
 Obsolescence cost
 Deterioration cost
 Taxes on inventory
 Insurance cost
 Storage and handling cost
 OUT-OF-STOCK COSTS
 It is the loss which occurs or which may occur due to
non availability of material.
 It includes-
 Break down/ delay in production
 Back ordering
 Lost sales
 Loss of service to customers, loss of goodwill, loss due to
lagging behind the competitors, etc.
 OTHER COSTS
 Capacity costs
 Over-time payments
 Lay-offs & idle time
 Set-up costs
 Machine set-up
 Start-up scrap generated from getting a production run
 Over-stocking costs
 INVENTORY
CONTROL
TECHNIQU
ES

ABC
VED

JIT
EOQ
 ABC ANALYSIS
 One of the widely used technique.
 Objective is to vary the expenses associated with
control.
 The ABC approach means of categorising the
inventory items into three classes A , B ,C.
 The categorising is done according to the turnover of
the various products.
 PROCEDURE
 List each inventory by number or by designation.
 Determine annual volume of usage and money value.
 Multiply each item annual volume of usage and rupee
value.
 Select of top 10% of all items which have high rupee %
classify the as A and accordingly.
 PROS
 REDUCTION IN INVESTMENT
 STRICT CONTROL
 MINIMUM STORAGE COST
 CONS
 NOT POSSIBLE WHEN THE NUMBER OF
ITEMSARE MORE.
 FOCUSES ON MONEY VALUE AND NOT ON
FUNCTIONAL IMPORTANCE.
 DOESN’T TAKE IN ACCOUNT VARIATION IN PRICE.
 IGNORES MARKET CONDITION
 VED ANALYSIS
 They are done to determine the criticality of an item
and its effect on production and other services.
 It is specially used for classification of spare parts.
 If the part is vital most it is given V, if it is essential
then it is given as E, if it is not so essential it is given as
D.
 For V items large stocks are maintained, while for E
items minimum stock is enough.
 PROS
 MONITORING AND CONTROL
 DETERMINE CRITICALITY
 MAINTAINING
 EOQ (ECONOMIC ORDER
QUANTITY)
 Economic Order Quantity is the level of inventory that
minimise the total inventory holding cost and
ordering cost.
 It is one of the oldest classical production scheduling
models.
 PROCEDURE
 It assume that demand for a product is constant over
the year and that each new order is delivered in full
when the inventory reaches zero.
 There is a fixed cost charged for each order placed
,regardless of the number of units ordered.
 The formula is EOQ= 2AO
C
 PROS
 MINIMIZES STORAGE AND HOLDING COSTS
 SPECIFIC TO THE BUSINESS
 CONS
 BASED ON ASSUMPTION
 COMPLICATED MATHS CALCULATION
 JIT Approach
 It is a design to increase efficiency, cut costs and
decrease waste by receiving goods only as they are
needed.
 It was originally formed in Japan as a response to the
countries limited natural resources.
 PROS
 LOWER INVENTORY HOLDING COSTS
 IMPROVED CASH FLOW
 LESS DEAD STOCK
 CONS
 PROBLEMS WITH ORDERFULFILLMENT
 LITTLE ROOM FOR ERROR
 PRICE SHOCKS
 EXAMPLE OF JUST IN TIME
METHODOLOGY
Toyota is famous for its implementation of a JIT
inventory system. Toyota orders parts only when
it receives new orders from customers. The
company started this method in the 1970s, and it
took over 15 years to perfect. Several elements of
JIT manufacturing need to occur for Toyota to
succeed. The company must have steady
production, high-quality workmanship, no
machine breakdowns at the plant, reliable
suppliers, and quick ways to assemble machines
that assemble the vehicles.
Toyota's JIT inventory system almost came to a crashing
halt in February 1997. A fire at Aisin, a Japanese-owned
automotive parts supplier to Toyota, decimated its capacity
to produce a P-valve for Toyota vehicles. The company was
the sole supplier of the part, and the fact that the plant
remained closed for weeks could have devastated Toyota's
supply line.
The auto manufacturer ran out of P-valve parts after just
one day. Production lines shut down for two days until a
supplier of Aisin could manufacture the valves. Other
suppliers for Toyota also had to shut down because the auto
manufacturer did not need other parts to complete any cars
on the assembly line. The fire cost Toyota 160 billion yen in
revenue and 70,000 cars.
THANK YOU