INVENTORY CONTROL

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Presentation Transcript

Inventory : 

Inventory Control By Dr. Sukhwant Singh

Slide 2: 

Logistics Management “The systematic and scientific process of -planning, implementing and controlling the efficient and effective flow and storage of resources (goods & services) from point of origin to the point of consumption in order to meet the customer’s requirements”

Slide 3: 

Stock of items kept to meet future demand Cushion between estimated and actual demand of materials Inventory

Slide 4: 

Hospital blood bank Setup time involved in procuring blood - find a donor - check for infection - test for blood type Patient cannot wait ! Why to Hold Inventories

Why to Hold Inventories : 

Why to Hold Inventories To ensure an uninterrupted supply Avoid overstocking and wastage Avoid shortages of critical items Improve patient care

Slide 6: 

Supervision of supply, storage and accessibility of items in order to insure an adequate supply without excessive oversupply. It determines how much of each item should be kept, when low items should be replenished, and how many items should be ordered or made when replenishment is needed. Inventory system

Slide 7: 

Inventory system Scientific System What to order When to order How much to order How much to stock

Slide 8: 

Water Tank Analogy

Slide 9: 

Planning of Inventory Demand Estimation Tendering & Procurement Receiving & Inspection Storage & Codification Materials accounting & Physical distribution Transportation Security of materials Condemnation and disposal of stores

Slide 10: 

Planning of Inventory Demand Estimation Requirement estimation Trends of previous years ( Analysis of Record ) Objectives of Organization Epidemiological trend Extra provision for unseen situation EOQ Value & cost analysis Resources available Demand = Requirement - Resources

Slide 11: 

Planning of Inventory Tendering & Procurement Open Tenders ,Through advertisement in media Limited Tenders, from reputed or prequalified parties Simple Tenders , One firm is asked to submit its rates Global Tenders, Invited from within India & abroad

Slide 12: 

Planning of Inventory Tendering & Procurement Steps in tendering system – Specifications of the items Vendor list Invitation of competitive bids Opening of bids Comparative statement Evaluation of bids Contract & negotiation Purchase order

Slide 13: 

Planning of Inventory Tendering & Procurement Principles of purchase – “Essential elements” Right item Right quantity Right price Right source Right delivery time Right method Right people “Supportive elements” Right Quality Right Place of delivery Right Transport Right Packaging Right Handling Right Material Intelligence Right contract

Slide 14: 

Planning of Inventory Tendering & Procurement Purchase process : Rate contract Blanket ordering Cash purchase System contract Reciprocal purchase

Slide 15: 

Planning of Inventory Receiving & Inspection Material Receipt Register

Slide 16: 

Planning of Inventory Storage, & Codification Storage system : Receive material Check it for quality and quantity Prepare the receipt vouchers Accept the inspected and passed material Undertake documentation for payment of bills Store the accepted material properly and safely Issue required material to various departments on requisition Prepare issue vouchers and account for them

Slide 17: 

Planning of Inventory Storage, & Codification Codification : Quick tracing & Retrieval Identification of dead & duplicate stocksBroad Categories – Pharmacy X – Rays Laboratory items Waste disposal etc.

Slide 18: 

Planning of Inventory Storage, & Codification Codification : Alphabetical System - Numerical system -

Slide 19: 

Planning of Inventory Material Accounting & Physical Distribution Bin Cards Daily receipt Issue Balance in hand Stock Identification Cards Material code number Ledger folio number Material Requisition Slip Exact quantity and type of material issued to various departments Material Received Note Store Ledger Material Return Note Material Transfer Note

Slide 20: 

Planning of Inventory Material Accounting & Physical Distribution : Flow of Goods : First In, First Out ( FIFO ) First Expiring, First Out ( FEFO ) Specific cost method Average cost method

Slide 21: 

Economic Terms In Inventory Purchase cost : the actual cost paid for the purchase of materials Should be the lowest possible Without compromising on quality Carrying costs Cost of borrowed money Cost of space Cost of additional man power Cost of obsolescence Cost of deterioration Cost of pileferage Ordering cost Shortage cost Direct Indirect

Slide 22: 

Economic Terms In Inventory Purchase Orders - Official record sent to the supplier to authorize shipping and billing. Lead-time - Total time between placing order and receipt of item (Include within-institution processing ) Shrinkage - Unaccounted loss of items Due to damage, theft and sloppy paperwork Accounts for 1% to 3% of items

Slide 23: 

Economic Terms In Inventory Minimum Inventory Level – Amounts necessary to support normal operations until additional material can be supplied Default level set at 1 x average quantity of stock Maximum Inventory Level - Upper limit that should be held for all stocked items to avoid unnecessary overstocking Default level set at 2 x average quantity of stock

Slide 24: 

Economic Terms In Inventory Safety Stock - Additional buffer stock for items to cover unexpected demand (Spikes), or to meet emergency requirements Default level set at 100% of minimum stock level Forward Stock Cover - Period (expressed in weeks) till current stock will last, based on average usage rate over preceding 12 months Target level of 2 weeks maximum

Slide 25: 

Types of Inventory Analysis ABC System VED System SDE System HML System GOLF System FSN System

Slide 26: 

Types of Inventory Analysis ABC System ( Annual Cost Method ) Based on “Pareto” concept (80/20 rule) and total usage in Rupees of each item. Divides inventory into three classes based on annual Rupee volume ( Cost ) Class A - high annual Rupee volume ( Costlier ) Class B - medium annual Rupee volume ( Less costlier ) Class C - low annual Rupee volume ( Economic )

Slide 27: 

Types of Inventory Analysis ABC System ( Annual Cost Method )

Slide 28: 

Types of Inventory Analysis ABC System ( Annual Cost Method )

Slide 29: 

Types of Inventory Analysis ABC System Example

Slide 30: 

Types of Inventory Analysis VED System Based on criticality of item Vital items ( Oxygen, anti-snake venom ) Essential items ( I.V. fluids, I.V. sets ) Desirable items ( Vitamin-E, Appetizers )

Slide 31: 

Types of Inventory Analysis Combined System ( ABC & VED ) Vital Essential Desirable Category – I ( AV ) A Category – II ( BE ) B Category – III ( CD ) C

Slide 32: 

Types of Inventory Analysis SDE system Ease of availability S – Scarce ( Specific anti-virals during an epidemic, drugs imported from outside ) D – Difficult to obtain ( Morphine ) E – Easy to obtain

Slide 33: 

Types of Inventory Analysis HML System Based on cost of individual item H – High cost M – Medium cost L – Low cost

Slide 34: 

Types of Inventory Analysis GOLF system Based on source of supply G – Govt. supply O – Open market L – Local source F – Foreign source

Slide 35: 

Types of Inventory Analysis FSN System Based on consumption rate of items F – Fast moving S – Slow moving N – Non moving

Slide 36: 

Basic Models Of Inventory Control Economic Order Quantity ( EOQ ) Model Fixed Order Quantity or ‘Q’ Model Bin Systems

Slide 37: 

Basic Models Of Inventory Control Economic Order Quantity ( EOQ ) Model Assumptions made for EOQ – Constant demand Constant unit price Constant carrying cost Constant ordering cost Instantaneous delivery Independent orders

Slide 38: 

Basic Models Of Inventory Control Economic Order Quantity ( EOQ ) Model

Slide 39: 

Basic Models Of Inventory Control Economic Order Quantity ( EOQ ) Model How much to order ? EOQ = √ (2 Co / Ch) e.g. Annual Demand – 1000 units i.v. fluids Ordering Cost ( Co ) - Rs. 10 / Order Holding Cost ( Ch ) - Rs. 0.50 / unit / year EOQ = √ 2 ( 1000 x 10 / 0.50 ) √ 40000 = 200 unit / order

Slide 40: 

Basic Models Of Inventory Control Economic Order Quantity ( EOQ ) Model When to order ? Recorder Point : Level of inventory at which a new order is placed R = dL ( d = demand rate per period, L = lead time ) e.g. Annual Demand – 1000 units Daily Demand – 1000 / 365 = 2.73 units Lead Time - 7 days Recorder Point = 2.73 x 7 = 19.11 units

Slide 41: 

Basic Models Of Inventory Control Economic Order Quantity ( EOQ ) Model How frequently to order ? Annual Demand Order Quantity 1000 / 200 = 5 Orders in a year

Miscellaneous Systems: Bin Systems : 

Miscellaneous Systems: Bin Systems

Advantages of Inventory Control : 

Advantages of Inventory Control Reduce certain costs such as Ordering costs Transportation costs Handling costs Advantage of quantity discounts Hedge against inflation and price increases Protection against delivery variations Enhanced efficiency of organization

THANKS : 

THANKS