Process of Inventory management & control
The document discusses the process of inventory management and control. It involves four key steps: 1) determining optimum inventory levels and adjusting them regularly, 2) determining the appropriate level of control needed, 3) planning and designing the inventory control system, and 4) planning the inventory control organization. The document also discusses determining optimum inventory levels by balancing inventory carrying costs with ordering costs to minimize stockouts. It describes classifying inventory into A, B, and C categories based on value and quantity to determine the appropriate level of control for each. Finally, it discusses two approaches to planning inventory systems: the fixed order quantity system and the fixed order periodic system.
Process of Inventory management & control
- 1. Process of inventory management & control 22/03/2013 Rashmiranjan 1
- 2. Definition: Scientific method of finding out how much stock should be maintained in order to meet the production demands and be able to provide right type of material at right time, in right quantities and at competitive prices. Inventory is actually money, which is available in the shape of materials (raw materials, in-process and finished products), equipment, storage space, worktime etc. 22/03/2013 Rashmiranjan 2
- 3. What is process of inventory management & control ? It refers to planning for optimum quantities of material at all stages in the production cycle and evolving techniques which would ensure the availability of planned inventories. 22/03/2013 Rashmiranjan 3
- 4. Four steps are involved in the process Determination of optimum inventory levels and procedures of their review and adjustment. Determination of the degree of control that is required for the best result. Planning and design of the inventory control system. Planning of the inventory control organization. 22/03/2013 Rashmiranjan 4
- 5. Determination of optimum inventory levelsToo much of inventory results in locking of working capital accompanied by increased carrying cost (but reduce ordering cost) Too less of inventory releases working capital for alternative uses and reduce carrying cost and increase ordering cost. But there is the risk of stock out costs. So, the actual level of inventory improve your production and reduce losses. For that, inventory manage management plan for the review of the stock. 22/03/2013 Rashmiranjan 5
- 6. Determination of degree of controlThe second aspect of inventory management is to decide just how much control is needed to realize the objectives of inventory management. So that the ABC classification is there- this approach is useful in deciding the degree of control. `A` class items are `High` in value but `low` in quantity. `C` class inventories are the opposite of `A` group, it is `High` in quantity and `low` in value. `B` group stock which are more or less equal in quantity value proportion to the total inventory. so inventory management decide the class of production on the basic of requirement. 22/03/2013 Rashmiranjan 6
- 7. Planning and design of the inventory styleAn inventory system provides the organisational structure and the operating policies for maintaining and controlling goods to be inventoried. The system is responsible for ordering and receipt of goods, timing the order replacement and keeping track of what has been ordered, how much, and form whom. There two general approaches to inventory system – (a)The fixed order quantity system (b)The fixed order periodic system (Variously know as periodic system, the periodic review system, and fixed order interval system.) 22/03/2013 Rashmiranjan 7
- 8. 22/03/2013 Rashmiranjan Das. PGDM 1st yr ,2nd sem Roll No.- 4010 Rashmiranjan 8