INVENTORY

• IDLE RESOURCE OF ANY KIND PROVIDED SUCH

RESOURCE HAS AN ECONOMIC VALUE
• RAW MATERIALS, STORES, SPARES OR FINISHED
GOODS KEPT IN STORAGE AGAINST FUTURE
REQUIREMENTS OR RESERVES
 INVENTORY - DEFENCE vs INDUSTRY

• PROFIT ORIENTATION
• NON CIVIL END USE
• WAR RESERVE
• ALL TIME BUY
• DISPERSION OF INVENTORY
 NEED FOR INVENTORY
• INTERNAL
– TOP MANAGEMENT DECISIONS EFFECTING
PROCUREMENT
– UNRELIABLE SUPPLIERS
– UNPREDICTABLE DEMANDS
– LONG LEAD TIME
– FAILURE IN SUPPLY
– REJECTION DUE TO POOR QUALITY
– USER’S INDULGE IN HOARDING
– USER’S INFLATING DEMANDS
– UNCERTAIN LABOUR FORCE
– MACHINES AND EQUIPMENT SUBJECT TO
BREAKDOWN
 NEED FOR INVENTORY

• EXTERNAL
– GOVT REGULATIONS
– MATERIAL AVAILABILITY
– SUPPLIER UNCERTAINITIES
– TECHNOLOGICAL INFRASTRUCTURE OF COUNTRY
– POLITICAL, ECO, SOCIAL FACTORS
– LABOUR UNREST, RAILWAY STRIKES, NATURAL
CALAMITIES, INTERNATIONAL RELATIONS
 INVENTORY CONTROL

• ABC
• HML
• VED
• SDE
• GOLF
• FSN
• SOS
ABC- BASED ON ANNUAL CONSUMPTION VALUE

• 10-15% OF INVENTORY ACCOUNTS FOR 70-75% OF

TOTAL BUDGET. - ‘A’
• 15-20% OF INVENTORY ACCOUNTS FOR 15-20% OF
TOTAL BUDGET - ‘B’
• 70-75% OF INVENTORY ACCOUNTS FOR 5% OF TOTAL
BUDGET - ‘C’
 VED

• VITAL
• ESSENTIAL
• DESIRABLE
 ABC-VED

CLASSES V E D

A CONSTANT MODERAT NIL

CONTROL, E STOCK STOCK
REGULAR
FOLLO UP
B MODERATE MODERAT VERY
STOCK E STOCK LOW
STOCK
C HIGH STOCK MODERAT LOW
E STOCK STOCK
 SELECTIVE INVENTORY CONTROL

• HML
• FSN
• GOLF
 ECONOMIC ORDER QUANTITY

• MOST EFFECTIVE TECHNIQUE FOR DETERMINING

RIGHT QUANTITY OF ITEMS TO BE PURCHASED
 TWO MAJOR COSTS INVOLVED

• PURCHASING/ACQUISITION COST
• INVENTORY CARRYING COST
– INTEREST
– TAXES PAYABLE
– OBSOLESCENCE
– SHRINKAGE
– EVAPORATION
– DETERIORATION OR SPOILAGE
– INSURANCE ON GOODS
 EOQ FORMULA

• Q= √(2AP)/(UC)

• A= ANNUAL CONSUMPTION IN UNITS

• P= PROCUREMENT COST PER ORDER
• C= ICC EXPRESSED AS % EG:X/100
• U= UNIT PRICE