1. presented by: Kritika chhatwal
Inventory Management
presented by:
Kritika chhatwal

2. Definitions
Inventory-A physical resource that a firm holds in stock with the intent of selling it or transforming it into a more valuable state.
Inventory System- A set of policies and controls that monitors levels of inventory and determines what levels should be maintained, when stock should be replenished, and how large orders should be

3. Inventory
Def. - A physical resource that a firm holds in stock with the intent of selling it or transforming it into a more valuable state.
Raw Materials
Works-in-Process
Finished Goods
Maintenance, Repair and Operating (MRO)

4. Inventory Positions in the Supply Chain
Raw
Materials
Works in
Process
Finished
Goods
Finished
Goods
in Field

5. Nature of Inventory
Quality - inventory can be a “buffer” against poor quality; conversely, low inventory levels may force high quality
Speed - location of inventory has gigantic effect on speed
Flexibility - location, level of anticipatory inventory both have effects
Cost - direct: purchasing, delivery, manufacturing
indirect: holding, stockout.
HR systems may promote this-3 year postings

6. Objectives
To maintain a large size of inventories of raw material and work in progress for efficient and smooth production & of finished goods for uninterrupted sales.
To maintain a minimum investment in inventories to maximize profitability.

7. Need To Hold Inventory:
Transacation Motive
Precautionary Motive
Speculative Motive

8. Zero Inventory?
Reducing amounts of raw materials and purchased parts and subassemblies by having suppliers deliver them directly.
Reducing the amount of works-in process by using just-in-time production.
Reducing the amount of finished goods by shipping to markets as soon as possible.

9. Reasons for Inventories
Improve customer service
Economies of purchasing
Economies of production
Transportation savings
Hedge against future
Unplanned shocks (labor strikes, natural disasters, surges in demand, etc.)
To maintain independence of supply chain

10. Inventory and Value
Quality
Speed
Flexibility
Cost

11. Design of Inventory Mgmt. Systems:
1)ECONOMIC ORDER QUALITY (EOQ)
EOQ minimizes the sum of holding and setup costs. It involves two types of costs:
a)Ordering costs
b)Carrying costs
2)REORDER POINT
The reorder point is that inventory level at which an order should be placed to replenish the inventory.To determine the recorder point under certainity we should know:
a)Lead time
b)Average usage

12. Carrying costs Requisitioning Order placing Transportation
Receiving ,inspecting ,storing
Clerical & staff

13. Ordering costs Warehousing Handling Insurance Deterioration
Clerical & staff

14. Some of Inventory Costs
Procurement costs
Out-of-stock costs

15. Procurement Costs Order processing Shipping Handling Purchasing
manufacturing

16. Out-of-Stock Costs
Lost sales cost
Back-order cost

17. Inventory control systems:
ABC system
JIT system
Out sourcing system
Computerised system
Response based system

18. ABC inventory control systems
A Items: very tight control, complete and accurate records, frequent review
B Items: less tightly controlled, good records, regular review
C Items: simplest controls possible, minimal records, large inventories, periodic review and reorder

19. JIT (just in time) inventory control system
In JIT system eliminates the necessity of carrying large inventories, & thus saves carrying & other related costs.
This system requires perfect understanding & coordination b/w the manufactures and suppliers.
The JIT system complements the TQM.

20. OUTSOURCING inventory control system
It is a system of buying parts and components from the outsides rather than manufacturing them internally.
For eg. Tata motors

21. COMPUTERISED inventory control system
It enables a company to easily track large items of inventories. It is an automatic system of counting inventories, recording withdrawals and revising the balance.
The information of the buyers and sellers are linked to each other.

22. RESPONSED BASED inventory control System
Replenishment, production, or purchases of stock are made only when it has been signaled that there is a need for product downstream
requires shorter order cycle time, often more frequent, lower volume orders
determine stock requirements to meet only most immediate planning period (usually about 3 weeks)

23. Objectives of Inventory Control system
1) Maximize the level of customer service by avoiding under stocking.
2) Promote efficiency in production and purchasing by minimizing the cost of providing an adequate level of customer service.

24. Anticipatory Inventory Control
determine requirements by forecasting demand for the next production run or purchase
establish current on-hand quantities
add appropriate safety stock based on desired stock availability levels and uncertainty demand levels
determine how much new production or purchase needed (total needed - on-hand)

25. THANKYOU