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Inventory Control Techniques
Inventory Control Techniques
Inventory Control Techniques
TECHNIQUES
CONTENTS
Introduction
Objectives of inventory control
Benefits of inventory control
Inventory control techniques procedure
Order points and service levels
Online drug inventory & supply chain
management system
Ware house Rohtak
Ware house PGIMS Rohtak
INTRODUCTION
Buffers Demand
Rate from Supply
Inventory Level Rate
Demand Rate
CONTENTS
Introduction
Objectives of inventory control
Benefits of inventory control
Inventory control techniques procedure
Order points and service levels
Online drug inventory & supply chain management
system
Ware house Rohtak
Ware house PGIMS Rohtak
OBJECTIVES OF INVENTORY CONTROL
• To meet unforeseen future demand due to variation
in forecast figures and actual figures.
• Conversely, a large %
of the items represent
only a small portion of
the cost value.
• Procedure to
determine varying levels
of control is called the
ABC analysis.
CONTD…..
• The origin of ABC analysis is PARETO’S 80 – 20 rule.
Example:
A B C
ABC ANALYSIS- PROCEDURE…
A AV AE AD
(90%) (80%) (70%)
B BV BE BD
(95%) (85%) (75%)
C CV CE CD
(99%) (90%) (80%)
CONTD….
▫ High,
▫ Medium
▫ Low.
• The cut-off point will depend on the individual user. The procedure
is to list out the items in descending order of unit value and invoke
management policy to fix the cut-off points. The management may
decide and delegate authority to various levels of officers
depending on the classification.
X-Y-Z Classification
• X-Y-Z has the value of inventory available on a particular date
in the stores as its basis. This study is taken up once in a year
during the annual stock-taking exercise.
▫ X items are those items whose stock value is high
▫ Y items fall between the two categories
▫ Z items are those whose stock values are low
Scarce in market,
Difficult to procure,
Easy to procure.
CONTENTS
Introduction
Objectives of inventory control
Benefits of inventory control
Inventory control techniques procedure
Order points and service levels
Online drug inventory & supply chain management
system
Ware house Rohtak
Ware house PGIMS Rohtak
Economic Order Quantity
ORDERING COST
• It includes-
▫ Capital cost
▫ Obsolescence cost
▫ Deterioration cost
▫ Taxes on inventory
▫ Insurance cost
▫ Storage & handling cost
IMPORTANT
TERMS
• Minimum Level – It is the minimum stock to
be maintained for smooth production.
• Maximum Level – It is the level of stock, beyond which a
firm should not maintain the stock.
• Reorder Level – The stock level at which an order should
be placed.
• Safety Stock – Stock for usage at normal rate during the
extension of lead time.
• Reserve Stock - Excess usage requirement during normal
lead time.
• Buffer Stock – Normal lead time consumption.
ECONOMIC ORDER QUANTITY
• For keeping the inventory and inventory cost low, it is
necessary to procure the item in as small consignments
as possible.
• Q=√2CR/H=√2x100x1600/8
=200 units
50
Cost per period
40
30
Min
20 cost
10
EOQ Procuring costs
• REORDERING POINT
• If the buffer stock is say 400, adding the buffer stock to the
above quality gives a ROL of 15,400.
REORDER METHODS
• CYCLIC SYSTEM
• TWO-BIN SYSTEM.
CYCLIC SYSTEM
• At fixed intervals.
• The size of the order will vary with fluctuation in
consumption. Orders are placed depending on the stock on
hand and rate of consumption,
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