inventory ankit dubey
TRANSCRIPT
8/3/2019 Inventory Ankit Dubey
http://slidepdf.com/reader/full/inventory-ankit-dubey 1/24
INVENTORY MANAGEMENT
Made By :- ANKIT DUBEY
8/3/2019 Inventory Ankit Dubey
http://slidepdf.com/reader/full/inventory-ankit-dubey 2/24
INVENTORY
´ 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 Management- 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
8/3/2019 Inventory Ankit Dubey
http://slidepdf.com/reader/full/inventory-ankit-dubey 3/24
INVENTORY CLASSIFICATION BY FLOWS
´ Raw Material ² Purchased Items Received But Not Issued to Production
& Include Component Parts/ Sub-assemblies etc.
´ Work-In-Process (WIP) - Raw Materials Issued to Production Being Processed/
Waiting for Next stage in Processing
´ Finished Goods ² End Product of the Production Process Ready for Sale Held at
Factory/ Central Warehouse
´ Distribution Inventories ² Stocked in Various points in the Distribution System
´ Maintenance, Repair & Operational Supplies (MRO) ² Items that Support the
Production Process But Do Not Become Part of Product ² Hand Tools/
Machine Spares/ Lubricants/ Cleaning Supplies
Work in
process
Work in
process
Finished
goods
Raw
Materials
Work in
process
CustomerVendors
8/3/2019 Inventory Ankit Dubey
http://slidepdf.com/reader/full/inventory-ankit-dubey 4/24
THE MATERIAL FLOW CYCLETHE MATERIAL FLOW CYCLE
InputInput Wait forWait for Wait toWait to MoveMove Wait in queueWait in queue SetupSetup RunRun OutputOutputinspectioninspection be movedbe moved timetime for operatorfor operator timetime timetime
Cycle timeCycle time
95%95% 5%5%
8/3/2019 Inventory Ankit Dubey
http://slidepdf.com/reader/full/inventory-ankit-dubey 5/24
INVENTORY AND SUPPLY CHAIN
MANAGEMENT´ Bullwhip effect«Demand information is distorted as it moves away
from the end-use customer«Higher safety stock inventories to are stored to
compensate´ Seasonal or cyclical demand
Demand that varies cyclically over time, usually inresponse to some effect of season or business cycle.Demand for electricity and Christmas ornaments is
seasonally cyclical; demand for housing is affected bythe effects of the business cycle upon interest rates.
Copyright 2006 John Wiley & Sons, Inc.
12-5
8/3/2019 Inventory Ankit Dubey
http://slidepdf.com/reader/full/inventory-ankit-dubey 6/24
TWO FORMS OF DEMAND
Copyright 2006 John Wiley & Sons, Inc.
12-6
DependentDependentDemand for items used to produce finalDemand for items used to produce final
productsproducts
Tires stored at a Goodyear plant are an
example of a dependent demand item
IndependentIndependentDemand for items used by externalDemand for items used by external
customerscustomers
Cars, appliances, computers, and housesare examples of independent demand
inventory
8/3/2019 Inventory Ankit Dubey
http://slidepdf.com/reader/full/inventory-ankit-dubey 7/24
INVENTORY AND QUALITY
MANAGEMENT
´ Customers usually perceive quality service as
availability of goods they want when they want
them
´ Inventory must be sufficient to provide high-
quality customer service in given time.
Copyright 2006 John Wiley & Sons, Inc.
12-7
8/3/2019 Inventory Ankit Dubey
http://slidepdf.com/reader/full/inventory-ankit-dubey 8/24
INVENTORY CLASSIFICATION B Y FUNCTIONS
Anticipation Inventory In Anticipation of Future Demand Ahead of Peak Selling Season/ Sales
Promotion/ Vacation Shutdown/ Threat of Strike
Fluctuation Inventory (Safety Stock)
To Cover Random Unpredictable Fluctuations in Supply/ Demand/ Lead Time
Safety Stock/ Buffer Stock/ Reserve Stock Prevents Disruption in Manufacturing/
Deliveries To Customers Due To Stock Out Resulting from Un-Anticipated Delays
Lot-Size Inventory (Cycle Stock)
Purchased/ Manufactured Quantities Greater Than Immediate Need Create Cycle Stock
To Take Advantage Of Quantity Discounts/ Reduce Shipping/ Set Up Costs
When Making/ Purchasing of Items at Same Rate These Will Be Used/ Sold
Cycle Stock is Portion of Inventory That Depletes Gradually as Customer OrderComes in and is Replenished Cyclically When Suppliers· Orders Delivered
Maintenance, Repair & Operating Supplies (MRO)
Items that Support the Production Process But Do Not Become Part of Product ²
Hand Tools/ Machine Spares/ Lubricants/ Cleaning Compounds/ Pencils/ Erasers
8/3/2019 Inventory Ankit Dubey
http://slidepdf.com/reader/full/inventory-ankit-dubey 9/24
INVENTORY CLASSIFICATION B Y FUNCTIONS
Transportation Inventory (Pipeline/ Movement Inventory)
Inventory in Transit Created as Time Required to Move Inventory from Plant To Distribution Centre/
Customer
Transit Inventory Not Dependent on Shipment Size But on Transit Time-T in Days
& Annual Demand-A in Units
Average Annual Inventory in Transit, I=TA/ 365 in Units
Reduction in Annual Average Transit Inventory Possible by Reducing
Transportation Time
Hedge Inventory Inventory Procured To Take Benefit of Low Prices When Supply More Than
Demand in Global Markets
Such Products Normally are Minerals/ Grains/ Animal Products
8/3/2019 Inventory Ankit Dubey
http://slidepdf.com/reader/full/inventory-ankit-dubey 10/24
INVENTORY MANAGEMENT OBJECTIVES
´ Maximizing Customer Service
´ Maximizing the Efficiency of Purchasing and
Production´ Minimizing Inventory Investment
´ Maximizing Profit
8/3/2019 Inventory Ankit Dubey
http://slidepdf.com/reader/full/inventory-ankit-dubey 11/24
INVENTORY COSTS
Or dering Cost:-´ Clerical costs of preparing purchase orders
´ Some spent finding suppliers and expediting orders
´ Transportation costs
´ Receiving costs (E.g. unloading and inspection)
Holding Costs :-
´ Costs of storage space (E.g. warehouse depreciation)
´ Security
´ Insurance´ Forgone interest on working capital tied up in inventory
´ Deterioration, theft, spoilage, or obsolescence
8/3/2019 Inventory Ankit Dubey
http://slidepdf.com/reader/full/inventory-ankit-dubey 12/24
Shor ta g e Costs:-
´́ Temporary or permanent loss of sales when demand cannot beTemporary or permanent loss of sales when demand cannot be
metmet
´ Disrupted production when raw materials are unavailable :
Idle workers
Extra machinery setups
´ Lost sales resulting in dissatisfied customers
´ Loss of quantity discounts on purchases
8/3/2019 Inventory Ankit Dubey
http://slidepdf.com/reader/full/inventory-ankit-dubey 13/24
what is Inventory Control?
It is planning, ordering and scheduling of material.
Right quantity of material available at right time.
Systematic control over purchasing, storing and using of material.
FUNCTIONS OF INVENTORY CONTROL:-
´ Effective use of financial resources.
´ Protection against all material losses
´ Proper calculation of cost of production.
´ Keep the ball of production bouncing.
´ Economies in purchasing.
´ Eliminates redundant inventory.´ Keeping prompt delivery to the customers
8/3/2019 Inventory Ankit Dubey
http://slidepdf.com/reader/full/inventory-ankit-dubey 14/24
TECHNIQUES IN SELECTIVE
INVENTORY CONTROL
ABC
VED
HML
FSN
XYZ
SOS
SDE
GOLF
8/3/2019 Inventory Ankit Dubey
http://slidepdf.com/reader/full/inventory-ankit-dubey 15/24
ABC
1. ABC Analysis (Always Better Control):-
´ Classify the items on the basis of importance and the
technique of grouping is called as ABC analysis.
´ To provide maximum overall protection against the stockouts for a given investment in safety stock.
´ This analysis prepared and checked weekly or monthly.
Category % of items %of value
A (High Cost) 10 70B (Medium Cost) 20 20
C (Low Cost) 70 10
8/3/2019 Inventory Ankit Dubey
http://slidepdf.com/reader/full/inventory-ankit-dubey 16/24
HML(HIGH,MEDIUM,LOW)
´ HML analysis is similar to ABC analysis, butonly price criterion is used.
´ The items are classified into three groups which
are called high , medium ,low.
´ For example management may decide that allitems of unit price above Rs 3000 will be of ¶H·,
those between 300 to 3000 are ¶M· , thosehaving unit price below Rs 300 will be ¶L·category
8/3/2019 Inventory Ankit Dubey
http://slidepdf.com/reader/full/inventory-ankit-dubey 17/24
GOLF(GOVT,ORDINARY,LOCAL,FOREI
GN)
´ GOLF analysis is based on nature of the supplierwhich determine quality , delivery ,
lead time , payment terms , continuity of supply
and administration work involved.G group covers procurement from governmentsupplier
O group covers procurement from non-governmentsupplier
L group from Local supplier
F group from foreign supplier
8/3/2019 Inventory Ankit Dubey
http://slidepdf.com/reader/full/inventory-ankit-dubey 18/24
XYZ
´ X YZ is based on the value of closing stock of
inventory
´
Items whose inventory values are high arecalled X
´ Y as moderate inventory
´ Z as low inventory
8/3/2019 Inventory Ankit Dubey
http://slidepdf.com/reader/full/inventory-ankit-dubey 19/24
SOS(SEASONAL,OFF-SEASONAL)
´ SOS divides items into two classes Seasonal &
Off-seasonal
´
As far as possible procurement must be madeduring harvesting when the price is low.
´ Off-season purchase could be a costly affair
unless the supplier is in position to offer off-
season discount eg onFans,regarments,coolers
8/3/2019 Inventory Ankit Dubey
http://slidepdf.com/reader/full/inventory-ankit-dubey 20/24
FSN(FAST,SLOW,NON-MOVING)
´ Classifies items on the basis of their rate of
consumption in the company.
´
High value non-moving items are a liability´ Low value fast moving items should kept in
ample quantities
8/3/2019 Inventory Ankit Dubey
http://slidepdf.com/reader/full/inventory-ankit-dubey 21/24
VED(VITAL,ESSENCIAL,DESIRABLE)
´ VED analysis represents classification of itemsbased on criticality.
´ Criticality means how a machine is important to
production.
´ The analysis classifies the items into threegroups called vital , essential & desirable.
´ Vital category encompasses those items which,if not made available, being the production to ahalt ,causing heavy losses
8/3/2019 Inventory Ankit Dubey
http://slidepdf.com/reader/full/inventory-ankit-dubey 22/24
´ Essential group includes items whose stock-out
cost is very high because it reduce production.
´
Desirable group comprises items which do notcause noticeable loss of production or their
stock-out entails nominal expenditure and
causes minor disruptions.
8/3/2019 Inventory Ankit Dubey
http://slidepdf.com/reader/full/inventory-ankit-dubey 23/24
SDE(SCARCE,DIFFICULT,EASY)
´ SDE classifies items into three groups called scarce,difficult & easy and focuses on ease of procurement asthe criterion.
´ Scarce group includes items of which dearth , are
imported or obtained through canalizing agencies of thegovernment.
´ Difficult items includes those items which are availableindigenously but are not easy to procure due to exoticraw material being used.
´ Easy category are produced on mass-scale , locallyavailable ,absence of string specifications and are easyto produce.
8/3/2019 Inventory Ankit Dubey
http://slidepdf.com/reader/full/inventory-ankit-dubey 24/24