Group MembersTushar Kaushik – 107Vikram Singh – 110Veeraj Chavan – 112Yogesh Waghela - 116Yugandhar Pradhan – 117Zeeshan Bakshi – 118

Management of Stock/ Inventory

IntroductionInventory

Inventory is detailed, itemized list, report, or record of things in one's possession, especially a periodic survey of all goods and materials in stock

Inventory Management

Inventory management is primarily about specifying the shape and percentage of stocked goods. It is required at different locations within a facility or within many locations of a supply network to precede the regular and planned course of production and stock of materials

Types of Inventory/Stock

Buffer/safety stock

Cycle stock

De-coupling

Anticipation stock

Pipeline stock

Reasons for keeping Inventory Time

Uncertainty

Economies of scale

INVENTORY PROPORTIONALITY

Inventory proportionality

The use of inventory proportionality is thought to have been inspired by Japanese just-in-time parts inventory management made famous by Toyota Motors in the 1980s

Inventory proportionality is the goal of demand-driven inventory management

PurposeThe primary optimal outcome is to have the same number

of days' (or hours', etc.) worth of inventory on hand across all products so that the time of run out of all products would be simultaneous

The secondary goal of inventory proportionality is inventory minimization

ApplicationThe technique of inventory proportionality is most

appropriate for inventories that remain unseen by the consumer

It is opposite to "keep full" systems and differentiated from the "trigger point" systems

Inventory proportionality is used effectively by just-in-time manufacturing processes and retail applications where the product is hidden from view

High Level Inventory Management

High Level Inventory ManagementHigh-level financial inventory has two basic formulae, which relate to

the accounting period:

Cost of Beginning Inventory at the start of the period + inventory purchases within the period + cost of production within the period = cost of goods available

Cost of goods available − cost of ending inventory at the end of the period = cost of goods sold

The benefit of these formulae is that the first absorbs all overheads of production and raw material costs into a value of inventory for reporting. The second formula then creates the new start point for the next period and gives a figure to be subtracted from the sales price to determine some form of sales-margin figure.

Accounting for Inventory

Financial accounting

Role of inventory accounting

FIFO vs. LIFO accounting

Standard cost accounting

Theory of constraints cost accounting

.

12-13

Inventory and Supply Chain ManagementBullwhip 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 demandInventory provides independence from

vendorsTake advantage of price discountsInventory provides independence

between stages and avoids work stop-pages

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

Inventory provides independence from vendors

Take advantage of price discounts

Inventory provides independence between stages and avoids

work stop-pages

12-15

Two Forms of Demand

DependentDemand for items used to produce

final products Tires stored at a Goodyear plant are

an example of a dependent demand item

IndependentDemand for items used by external

customersCars, appliances, computers, and

houses are examples of independent demand inventory

12-16

Inventory and Quality ManagementCustomers 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 TQM

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 TQM

12-18

Inventory Control Systems

Continuous system (fixed-order-quantity)

constant amount ordered when inventory declines to predetermined level

Periodic system (fixed-time-period)

order placed for variable amount after fixed passage of time

Special Terms Stock Keeping Unit (SKU) is a unique combination of all the components

that are assembled into the purchasable item. Therefore, any change in the

packaging or product is a new SKU. This level of detailed specification

assists in managing inventory.

Stock out means running out of the inventory of an SKU.

"New old stock" (sometimes abbreviated NOS) is a term used in business

to refer to merchandise being offered for sale that was manufactured long

ago but that has never been used. Such merchandise may not be produced

anymore, and the new old stock may represent the only market source of a

particular item at the present time.