Inventory management

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INVENTORY MANAGEMENT & VENDOR DEVELOPMENT Presented By: K.Bhavya M.Pharmacy

CONTENTS : 

CONTENTS INVENTORY MANAGEMENT: Objectives Advantages Techniques of inventory control VENDOR DEVELOPMENT Stages involved CONCLUSION REFERENCES

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Inventory management may be defined as a scientific method of finding out how much stock should be maintained in order to meet the production demand and be able to provide right type of material at right time in right quantity at competitive price. INPUT Material management department OUTPUT Production department INVENTORY Goods in store work in process Finished product

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Inventory control is a multi item & multi stage in nature. Determine when to buy & how much to buy. coordination between production department with other departments. Promote effectiveness of activities.

OBJECTIVES: : 

OBJECTIVES: Existence of time lag between manufacturing & transport operations. Avoiding risk of loss of life. Schedule various stages of the system independently.

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Need to meet fluctuations in demand & production rates.. Preventing idealness of men, machine, moral. Need to exercise influence over change of material prices particularly basic raw material. Reducing administration work load. Control over quality of product

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ADVANTAGES: Allow full advantage of economics of bulk purchases & transportation. Reduce changes of going out of stock. Leads to reduction in inventory levels. Release more of capital for other operations.

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Increase profitability of an organization. Adequate customer services. Providing flexibility to changes product lines. Price discount by bulk purchase.

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Production inventory M.R.O inventory Work In Process inventory Finished goods inventory INVENTORY

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TYPES OF INVENTORY Transaction inventory Speculator inventory Precautionary inventory

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CONTROLE ASPECTS OF INVENTORY Elimination of inventory Periodic Review Semi automatic routines Minimum balance Reorder point Maximum allowable Standard order quantity

TECHNIQUES OF INVENTORY CONTROLE : 

TECHNIQUES OF INVENTORY CONTROLE ABC analysis Economic Order Quantity Perpetual Inventory System Review of slow and non moving things Input – Out put Ratio Analysis Setting up of various levels Use of material budgeting Establishment an effective purchase procedure

ABC ANALYSIS : 

ABC ANALYSIS

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OBJECTIVES: Economizing the efforts & cost. Protection against stock outs. Used to develop policy guide lines. Helps to rational the no. of orders. Accurate forecast in material planning. Central purchasing & storage.

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1)Calculate rupee value for each item 2)Annual consumption of each item 3)Arrange the items 4)List of items (annual consumption) 6)Plot a graph 5)Total METHODOLOGY OF ABC ANALYSIS

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CONSUMPTION COST(%) INVENTORY ITEMS(%) PARETO CURVE

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A-items: Annual/half yearly control. Purchase department. Frequent audits. Waste control.

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B-items: Moderate control. Based on past experience. Reorder points. 3 – months.

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C-items: Least important. Clerk/store keepers. 6months – year. ADVANTAGES: Storing ,handling ,delivery become better. Time utilization

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PARETO LAW

ECONOMIC ORDER QUANTITY(EOQ) : 

ECONOMIC ORDER QUANTITY(EOQ) How much of inventory is ordered at a time. METHODS OF DETERMINATION OF EOQ 1)Tabular determination of EOQ 2)Graphical presentation of EOQ 3) Algebraic formula for determination of EOQ

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Tabular determination of EOQ Number of orders need to be placed Total annual cost=ordering cost+ carrying cost

Graphical presentation of EOQ : 

INVENTORY IN 1000 UNITS Graphical presentation of EOQ

Cost involved in EOQ : 

COST FOR PERIOD Cost involved in EOQ

Algebraic formula for determination of EOQ : 

Algebraic formula for determination of EOQ 2 A S I U Q Q = economic lot size S = Ordering cost A = Annual inventory carrying cost U = cost of one unit.

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APPLICATIONS: Calculating economic lot size. Increase inventory---If sales increase up to 20%. LIMITATIONS: Not suitable for large lot size. Not suitable when demand is irregular. Step up cost (LIMIT)

PERPETUAL INVENTORY SYSTEM : 

PERPETUAL INVENTORY SYSTEM Recording store balance. BIN CARD: Store keeper. STORE LEDGER: Cost accounting department CONTINUOUS STOCK TAKING: Comparison by store keeper.

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ADVANTAGES: Detection & rectification of errors. Checking of store items. Helps in loss accounts, balance sheet. Over & under stocking is avoided.

REVIEW OF SLOW & NON MOVING ITEMS : 

REVIEW OF SLOW & NON MOVING ITEMS Slow moving items. Obsolete items Dormant items Periodic review Moving ratios

INPUT - OUT PUT RATIO ANALYSIS : 

INPUT - OUT PUT RATIO ANALYSIS Input-Out put Ratio Input material Out put material Cost of raw material Input Output Rate per units in finished product

SETTING UP OF VARIOUS LEVELS : 

SETTING UP OF VARIOUS LEVELS Maximum level Minimum level Reorder level Re order quantity Minimum consumption Normal consumption for week Average delivery time Re order level

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Reorder level Minimum consumption during the period Maximum reorder period Danger level : below the minimum stock level.

USE OF MATERIAL BUDGETING : 

USE OF MATERIAL BUDGETING Purchase budget for whole & individual items. Increase/decrease in the salaries. Adjustment of over/under buying

ESTABLISHING AN EFFECTIVE PURCHASE PROCEDURE : 

Reorganization of items Order placed Suppliers are selected Goads received Checking & paying Purchase transaction recorded. ESTABLISHING AN EFFECTIVE PURCHASE PROCEDURE Written requisition form

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VENDOR DEVELOPMENT

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How much quantity is required to be purchased? How much time is available for making such purchase? Will the material be required repeatedly/occasionally? What is the volume of purchase of the required material? What is commercial viability of the material?

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SURVEY STAGE ENQUIRY STAGE NEGOTIATIONS & SELECTION STAGE EXPERIENCE & EVALUATION STAGE VENDOR AUDIT

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SURVEY STAGE Supplier catalogs Trade directors Salesman Telephone directories Trade Journals

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FACTORS: Internal facilities of vendors. Financial adequacy & stability. Reputation of the vendor. Location of vendor factory. After sale services. Industrial relations.

NEGOTIATION & SELECTION STAGE : 

NEGOTIATION & SELECTION STAGE Finalization of vendors. Vendor audit. Approved vendors list. Certificate of analysis (CoA). Buying techniques.

EXPERIENCE & EVALUATION STAGE : 

EXPERIENCE & EVALUATION STAGE Categorical method Weigh point method. Cost ratio method.

1.CATEGORIAL METHOD : 

1.CATEGORIAL METHOD Performance report --- 3 months. Based on factors. Number score Word rating

2.WEIGH POINT METHOD : 

2.WEIGH POINT METHOD

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No. of lots accepted Suppliers offer Rating point Total no. lots delivered No. of lots delivered in time Rating point Rating point Price Rating Least offer received Quality Rating No. of lots Received Delivery Rating 3.COST RATIO METHOD

VENDOR QUALITY RATING : 

VENDOR QUALITY RATING VQR 100 q s L L+1 q = Fraction of product accepted s = Fraction of lot accepted L = No. of lots submitted

APPROVED VENDORS LIST : 

APPROVED VENDORS LIST Vendor s name. Product supplied by vendor Specifications & approvals. Vendor approval date. Comments for additional information.

CONCLUSION : 

CONCLUSION Inventory management is essential to maintain large size inventory for effective & smooth production. Economizing the efforts & cost involved. Vendor development is an important criteria. Maintain the quality of finished product as per GMP guide lines.

REFERENCES : 

REFERENCES Pharmaceutical Production and Management By C.V.S Subrahmanyam Page.no.267 Pharmaceutical industrial management By R.M Mehta Page.no.103-119 Industrial management, Production management and Operation research By K.K Ahuja Page no.266