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    Inventory Management: BY: Chanchal Agarwal

    Uploaded by

    Rahul Kumar Jain
    This document discusses inventory management. It defines inventory as stock of goods including raw materials, work in progress, consumables, and finished goods. The objectives of inventory management are to ensure continuous supply while avoiding overstocking or understocking. Tools for inventory management include determining stock levels, safety stocks, economic order quantity, ABC analysis, and inventory reports. Techniques include calculating minimum, maximum, and danger stock levels, determining safety stocks based on opportunity and carrying costs, and using the economic order quantity model.

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    Inventory Management: BY: Chanchal Agarwal

    Uploaded by

    Rahul Kumar Jain
    103 views19 pages
    This document discusses inventory management. It defines inventory as stock of goods including raw materials, work in progress, consumables, and finished goods. The objectives of inventory management are to ensure continuous supply while avoiding overstocking or understocking. Tools for inventory management include determining stock levels, safety stocks, economic order quantity, ABC analysis, and inventory reports. Techniques include calculating minimum, maximum, and danger stock levels, determining safety stocks based on opportunity and carrying costs, and using the economic order quantity model.

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    Inventry Mgmt

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    This document discusses inventory management. It defines inventory as stock of goods including raw materials, work in progress, consumables, and finished goods. The objectives of inventory management are to ensure continuous supply while avoiding overstocking or understocking. Tools for inventory management include determining stock levels, safety stocks, economic order quantity, ABC analysis, and inventory reports. Techniques include calculating minimum, maximum, and danger stock levels, determining safety stocks based on opportunity and carrying costs, and using the economic order quantity model.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    103 views19 pages

    Inventory Management: BY: Chanchal Agarwal

    Uploaded by

    Rahul Kumar Jain
    This document discusses inventory management. It defines inventory as stock of goods including raw materials, work in progress, consumables, and finished goods. The objectives of inventory management are to ensure continuous supply while avoiding overstocking or understocking. Tools for inventory management include determining stock levels, safety stocks, economic order quantity, ABC analysis, and inventory reports. Techniques include calculating minimum, maximum, and danger stock levels, determining safety stocks based on opportunity and carrying costs, and using the economic order quantity model.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 19

    INVENTORY MANAGEMENT

    BY: Chanchal Agarwal

    INTRODUCTION
    MEANING OF INVENTORY: The meaning of inventory is stock of goods. In accounting language it may include:
    1.RAW MATERIAL: They are required to carry out

    production activities uninterruptedly.


    2.WORK-IN-PROGRESS: It is a stage of stocks between raw material & finished goods.

    3.CONSUMABLES: These are needed to smoothen the process of production.

    4.FINISHED GOODS: These are the goods which are


    ready for the consumers. 5.SPARES: Form a part of inventory.

    Purpose/ Benefits of Holding Inventories


    Transaction Motive to facilitate Continuous
    Production. Speculative Motive for taking advantage of price fluctuations, saving in re-ordering costs and quantity discounts, etc. Precaution Motive for meeting unpredictable changes in demand and supplies of materials

    Inventory Management
    An efficient system of inventory management will determine What to purchase How much to purchase From where to purchase Where to store

    Objectives Of Inventory Management


    To ensure continuous supply of raw material, spares and finished goods.

    To avoid both overstocking and under stocking of


    inventory. To maintain investments in inventories at optimum level.

    OBJECTIVES OF INVENTORY MANAGEMENT(cntd ) To eliminate duplications in orders

    To keep material cost under control.


    To minimize losses through wastage and damages .

    Tools of Inventory Management


    1. Stock Levels 2. Safety Stocks 3. Ordering System of Inventory 4. Determination of EOQ 5. ABC Analysis

    6.VED Analysis

    7.Inventory Turnover Ratio


    8.Aging Schedule of Inventories 9.Classification & Codification on Inventories 10.Inventory Reports

    Techniques of inventory management


    Determination of stock level: Minimum level=reordering level-(normal consumption * normal reordering period )

    Maximum level=reordering level+ reordering quantity (minimum consumption * minimum reordering period )
    Danger level=consumption * maximum reorder period

    Determination safety stocks:


    Safety stock is a buffer to meet some unanticipated increase in usage. TWO COST ARE INVOLVED IN THE DETERMINATION 1.OPPORTUNITY COST OF STOCK OUTS 2.CARRYING COST INVENTORY TURNOVER RATIO:

    INVENTORY TURNOVER RATIO=COST OF GOOD


    SOLD /AVERAGE INVENTRY AT COST

    Economic Order Quantity: Economic order quantity is the size of the lot to be purchased which is economically viable. EOQ IS MADE UP OF TWO PARTS : 1.ORDERING COST: These cost are associated with the purchasing or ordering of materials.

    2.CARRYING COST: These are the costs for holding the


    inventories.

    A-B-C ANALYSIS:
    The materials are divided into three categories viz, A ,B &C Group-A: Under this almost 10% of the items contribute to 70% of value of consumption.

    Group-B: Under this category 20% of the items contribute about 20% of value of consumption. Group-C:

    Under this category about 70% of items of


    material contribute only 10% of value of

    consumption.

    VED ANALYSIS:
    The VED analysis is used generally for spare parts. The requirements and urgency of spare parts is different from that of materials. Spare parts are classified as

    vital(V),essential(E),desirable(D).

    VITAL SPARE PARTS: These are must for running the concern smoothly. ESSENTIAL SPARE PARTS: Necessary but stock kept at low figures. DESIRABLE SPARE PARTS: May be avoided at times.

    INVENTORY REPORTS:
    The management is kept informed with the latest
    stock position of different items by preparing

    periodical inventory reports. on the basis of these


    reports management takes corrective action wherever necessary.

    ORDERING SYSTEMS OF INVENTORY:


    There are three prevalent systems of ordering and a concern can choose any one of these:
    1.Fixed order quantity system generally known as economic order quantity system. 2.Fixed period order system or periodic re-ordering system or periodic review systems.

    3.Single order and scheduled part delivery system.

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