INVENTORY MANAGEMENT BY, Vivek Barad Aditya Deshmukh Aditya Chandra Abhinav Pathak.

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Presentation transcript:

INVENTORY MANAGEMENT BY, Vivek Barad Aditya Deshmukh Aditya Chandra Abhinav Pathak

What is inventory An inventory is a stock or store of goods. Inventory ranges from small things like nuts to large items like machines. Inventory plays an important role in both manufacturing as well as service sector. An inventory is a stock or store of goods. Inventory ranges from small things like nuts to large items like machines. Inventory plays an important role in both manufacturing as well as service sector.

IMPORTANCE OF INVENTORY Inventory management is a core operations management activity. A good inventory management is essential for successful operations of business processes. Poor inventory levels provides complications. Inventory management is a core operations management activity. A good inventory management is essential for successful operations of business processes. Poor inventory levels provides complications.

FUNCTIONS OF INVENTORY To meet anticipated customer demand. To smoothen production requirements. To hedge against price rises. To protect against stockouts. To take advantage of quantity discounts.

TYPES OF INVENTORIES Inventories are majorly classified in 5 types: 1.Pipeline inventories 2.Cyclical inventories 3.Safety stocks 4.Obsolete stocks 5.Hedge inventories

Costs in Inventory Management 1.Holding Cost – Insurance – Storage – Taxes – Interests – Pilferages 2.Ordering cost – Shipping cost – Inspection – Invoice preparation

3. Shortage cost – Opportunity cost – Backorder cost – Goodwill cost

CLASSIFICATION OF INVENTORY There are many an to classify the inventory in an organization: 1.ABC Analysis 2.XYZ Analysis 3.FSN Analysis 4.VED Analysis

INVENTORY MODELS There are 2 inventory models : 1.Economic order quantity 2.Economic product quantity

EOQ Used to identify fixed order size Minimizes sum of annual cost of holding inventory & Ordering inventory Only one product is involved Annual demand requirement is known Demand rate is reasonably constant as demand is spread evenly. Lead time does not vary Each order is received in a single delivery There are no quantity discounts

Annual Cost ($) Order Quantity Annual Carrying Costs Annual Ordering Costs Total Annual Stocking Costs SmallerLarger Lower Higher EOQ

EPQ Only one item is involved Annual demand is known The usage rate is constant Usage occurs continually, but production occurs periodically The production rate is constant Lead time does not vary There are no quantity discounts

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References William J Stevenson Mahadevan

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