INTRODUCTION

• The term inventory means the value or amount of materials or resource on

hand. It includes raw materials, work-in-process, finished goods, etc.

• 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 is also the supervision of supply, storage, and accessibility

of items in order to ensure an adequate supply without excessive oversupply.

• Inventory control pertains primarily to the administration of established

policies, systems & procedures in order to reduce the inventory cost. The
well-functioning inventory system is a process of overseeing the flow of
items into and out of your stock.
 OBJECTIVES OF INVENTORY
CONTROL
• To avoid both over-stocking and under-stocking of inventory.
• To minimize losses due to deterioration, pilferage, wastages and damages.
• To ensure perpetual inventory control so that materials shown in stock ledgers
should be actually lying in the stores.
• To ensure right quality goods at reasonable prices.
• To maintain investments in inventories at the optimum level as required by the
operational and sales activities.
• To eliminate duplication in ordering or replenishing stocks. This is possible with help
of centralizing purchases.
• To meet unforeseen future demand due to variation in forecast figures and actual
figures. This is possible with the knowledge of safety stock.
• To reduce loss due to changes in prices of inventory items.
• To balance various costs of inventory such as order cost or set up cost and inventory
carrying cost.
• To balance the stock out cost/opportunity cost due to loss of sales against the costs of
inventory.
 LIKELY CHALLENGES IN
INVENTORY
• Supply of substandard product(s).
• Returning dented or damaged items received on arrival.
• Doing a purchase return to an item due to expire or stock
items in dog category.
• Having more than one product with the same part
number.
• Tracking movement of stock between the warehouse and
other departments.
• Picking error, oversell, and out-of-stock (lead time
error).
 EFFECTIVE INVENTORY PROCESS
• The inventory process generally includes;
RECEIVING of both stock and non stock items,
LABELING, STORAGE, WITHDRAWAL, ISSUE,
and MOVEMENT of items through work-in-process
routine.

• It also involves TRACKING of items movement,

inventory-sales analysis, turnover analysis, normal
and abnormal spoilages, par level, identifying stock
low-turn stock and maintaining records of all these
events and their effects.
 The Inventory Cycle
Profile of Inventory Level Over Time
Quantity Usage
on hand rate

Reorder
point

Time
Receive Place Receive Place Receive
order order order order order
Lead time
 Inventory Counting Systems
• Periodic System
Physical count of items made at periodic
intervals
• Perpetual Inventory System
System that keeps track of removals from
inventory continuously, thus monitoring
current levels of each item.
 Tools and techniques of inventory
management
• Determination of stock levels
• Determination of safety levels
• Selecting a proper system for ordering of inventory
• Determination of Economic order quantity
• A.B.C analysis
• V.E.D analysis
• Inventory turn over ratios
• Lead time
• Perpetual inventory system
• JIT control system