Slide 1: 2/11/2010 XIDAS, INVENTORY CONTROL 1 -
Shalini Catherine Panna
Mahendra Prasad Topic Inventory means… : 2/11/2010 XIDAS, INVENTORY CONTROL 2 Inventory means… All the materials , parts, suppliers, expenses and in process or finished products recorded on the books by an organization and kept in its stocks, warehouses or plant for some period of time. Definition of inventory control : 2/11/2010 XIDAS, INVENTORY CONTROL 3 Definition of inventory control Inventory control is the technique of maintaining the size of the inventory at some desired level keeping in view the best economic interest of an organization. Slide 4: 2/11/2010 XIDAS, INVENTORY CONTROL 4 Objectives of inventory control : 2/11/2010 XIDAS, INVENTORY CONTROL 5 Objectives of inventory control Protection against fluctuations in demand;
Better use of men, machines and material;
Protection against fluctuations in output;
Control of stock volume;
Control of stock distribution. Major activities of inventory control : 2/11/2010 XIDAS, INVENTORY CONTROL 6 Major activities of inventory control Planning the inventories;
Procurement of inventories;
Receiving and inspection of inventories;
Storing and issuing the inventories;
Recording the receipt and issues of inventories.
Physical verification of inventories;
Follow-up function ;
Material standardization and substitution. Inventory Decisions : Inventory Decisions Executive decide two basic issues while dealing with inventories;
(a) How much of an item to order when the inventory of that item is to be
(b) When to replenish the inventory of that item.
By definition, inventory facilitate production or satisfy customer demands.
Inventory system is a set of policies and controls which monitors and determines the levels of inventory. Inventory conventionally include raw materials, work-in-progress, components parts, supplies and finished goods. Operations is a transformation process in which the inputs are raw materials and output is the finished goods.
Suppliers Raw materials Finished good customers. 2/11/2010 XIDAS, INVENTORY CONTROL 7 Production
Work-in-progress Slide 8: 2/11/2010 XIDAS, INVENTORY CONTROL 8 Inventory level Supply rate Demand rate Steps in Inventory control : 2/11/2010 XIDAS, INVENTORY CONTROL 9 Steps in Inventory control Deciding the maximum- minimum limits of inventory;
Determination of Reorder point;
Determination of reorder quantity;
Perpetual inventory control;
Method of control through turn over. Maximum stock level : 2/11/2010 XIDAS, INVENTORY CONTROL 10 Maximum stock level Quantity of inventory above which should not be allowed to be kept. This quantity is fixed keeping in view the disadvantages of overstocking;
Factors to be considered:
Amount of capital available.
Godown space available.
Possibility of loss. Continue…. : 2/11/2010 XIDAS, INVENTORY CONTROL 11 Continue…. Cost of maintaining stores;
Likely fluctuation in prices;
Seasonal nature of supply of material;
Restriction imposed by Govt.;
Possibility of change in fashion and habit. Minimum stock level : 2/11/2010 XIDAS, INVENTORY CONTROL 12 Minimum stock level This represents the quantity below which stocks should not be allowed to fall .
The level is fixed for all items of stores and the following factors are taken into account:
2. Rate of consumption of the material during the lead time. Re-ordering level : 2/11/2010 XIDAS, INVENTORY CONTROL 13 Re-ordering level It is the point at which if stock of the material in store approaches, the store keeper should initiate the purchase requisition for fresh supply of material.
This level is fixed some where between maximum and minimum level. Economic Order Quantity : 2/11/2010 XIDAS, INVENTORY CONTROL 14 Economic Order Quantity It is also known as standard order quantity , optimum quantity or economic lot size.
By definition economic order quantity that size of order for which the total cost is minimum. Computation of EOQ : 2/11/2010 XIDAS, INVENTORY CONTROL 15 Computation of EOQ The widely used formula is
R= Annual quantity to be used in units.
Cp=Cost of placing an Order.
Ch= cost of holding one unit for one year. ABC Analysis : 2/11/2010 XIDAS, INVENTORY CONTROL 16 ABC Analysis It is efficient control of stores requires greater in case of costlier items. Continued…. : 2/11/2010 XIDAS, INVENTORY CONTROL 17 Continued…. Perpetual Inventory System : 2/11/2010 XIDAS, INVENTORY CONTROL 18 Perpetual Inventory System It is a method of recording stores balances after every receipt and issue, to facilitate regular checking and obviate closing down for stock taking.
-Wheldon Factors which help helpful to make system successful : 2/11/2010 XIDAS, INVENTORY CONTROL 19 Factors which help helpful to make system successful Stores ledger, stores control, cards or bin cards are properly maintained ;
Quantity balance store shown in the store ledger; stock control and bin cards are reconciled;
Exploring the cause of discrepancies if any physical balances and book balances. Slide 20: Balance sheet is were information is calculated to determine losses and gains from daily sales. This is a very important part of fuel management it will give you important records of sales (this is inventory control). Slide 21: This is were information collected from meter totals and tank dips are added and recorded. Slide 22: This is were we record our calculated losses and gains for every individual month. This sheet is used for the years sales report. Will give you sales of individual months. Record keeping is a important method of tracking your inventory. Inventory Turnover method : Inventory Turnover method It means how many times a company’s inventory is sold and replaced (finished product) 2/11/2010 XIDAS, INVENTORY CONTROL 23 Continued ….. : Continued ….. Inventory ratio (Raw material)-
The value of material consumed during a period 2/11/2010 XIDAS, INVENTORY CONTROL 24 Average value of inventory during that period High ratio = fast moving stock Slide 25: YOUR CRITICAL ANALYSIS 2/11/2010 XIDAS, INVENTORY CONTROL 25 Slide 26: 2/11/2010 XIDAS, INVENTORY CONTROL 26 Thank you