Ivita Manglesh (1714)

INVENTORY MANAGEMENT
Ivita manglesh
INTRODUCTION
Inventory is material that the firm obtains in advance of

need, holds until it is needed, and then used, consumes,
incorporates into a product, sells, or otherwise disposes it
of. A business inventory is temporary in nature.
Inventories are stock of any kind like fuel and lubricants,

spare parts and semi-processed materials to be stored for
future use mainly in the process of production or it can be
known as the ideal resource of any kind having some
economic values.
INVENTORY VALUATION INVOLVES TWO
PROCESS
Determination of quality of each type of inventory

held.
Assignment of the values of the

units items of inventory
FORMS OF INVENTORIES
There are many types of inventory. The

form of inventories depends upon the type
of concern. All types of inventory do not
require same treatment and therefore policy
with regard to each may also differ.
RAW MATERIAL INVENTORIES:
There are raw materials and other supplies, parts and

components, which enter into the product during the production
process and generally form part of the product.
WORK IN PROCESS INVENTORIES:
These are semi finished, work in progress and partly finished

products formed at the various stages of production.
M.R.O INVENTORIES/ SPARE PART
INVENTORIES:
Maintenance, repairs and operating supplies which are consumed
during the production process and generally do not form part of the
product itself are referred to as spare part inventories.
FINISHED INVENTORIES:
These are complete finished products ready for sales. In a
manufacturing unit, they are the
final output of the production process.
They can also be classified as:-
• Movement inventories
• Lot size inventories
• Anticipation inventories
• Fluctuation inventories
CLASSIFICATION OF
INVENTORIES COST:
Inventories’ cost are traditionally

categorized into four basic types:
PURCHASE COST:
For items that are purchased from outside the firms, this is usually
the unit price that the firm pays to its vendor. As an item moves
through the logistics system of the firms, it purchase cost in the
inventory analysis should reflect its fully landed cost, by which is
meant the cost to acquire and moves the item to that point in the
system.
ORDERING COST:
In addition to the per unit purchase cost, there is usually an additional cost
which is incurred whenever we order, reorder or replenish the inventory. If
we produce items internally then there will be an organization set up cost.
This happens because we have to shut down the manufacturing line and
change over, reconfigure the line to make a specific item.
This is the cost involved with processing the order, involving paying the bill,
auditing, and so forth.
HOLDING COST:
The cost that accrue due to the actual holding of the inventory over a time
period. Many different kinds of cost can be considered as holding cost. The
key characteristics of holding cost varies with the amount of inventory being
held and the time that the inventory is held. The holding cost can further be
classified as follows:
• Storage cost
• Service cost
• Risk cost
•Capital cost.
SHORTAGE COST:
When a demand arises which cannot be satisfied from available inventory

an inventory shortage occurs. Purchase, ordering and holding cost can be
thought of as the cost of having inventories, while shortage cost result for
not having inventory, or for not having enough inventory at the right place at
the right time
FOUR SPECIFIC CASE WHERE SHORTAGE
COST MAY EXIST ARE:
 Back orders
 Lost sales
 Lost customer cost
 Disruption cost
INVENTORY CONTROL:
Inventory control is the means by which materials

of the correct quality and in correct quantity are
made available as and when required with due
regard to economic in storage and ordering cost.
Hear the desired level of inventory can neither be
high or low because high level inventory will lead to
increase in carrying cost while low level of
inventorywill lead to increase in ordering cost
THE ACTIVITIES OF INVENTORY CONTROL
NORMALLY INCLUDE THE FOLLOWING:
•Determination of the limits of the inventories to be held.
•Determination of inventory policies.
•Selling out of investments pattern and its regulations as per

individual and collective requirements.
•Follow up to examine the work of inventory policy and effect

change as and when needed.
SCOPE OF INVENTORY CONTROL:
SCOPE OF INVENTORY CONTROL
Determination Determining Determining

of inventory economic order size lead time
policies. Examining
the work of
Determining inventory
various Safety or buffer
policy
stock levels stock
OBJECTIVES OF INVENTORY CONTROL:
• To ensure smooth flow of stock.
• To provide for required quality of material s.
•To control investments in stock.
• Protection against fluctuating demand.
• Protection against fluctuations in output.
• Minimization of risk and uncertainty.
• Risk of obsolescence.
•Minimization of material cost.

THANK YOU.

Ivita Manglesh (1714)

Uploaded by

Copyright:

Available Formats

Ivita Manglesh (1714)

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Ivita Manglesh (1714)

Uploaded by

Copyright:

Available Formats

INVENTORY MANAGEMENT

Inventory is material that the firm obtains in advance of

Inventories are stock of any kind like fuel and lubricants,

Determination of quality of each type of inventory

Assignment of the values of the

There are many types of inventory. The

There are raw materials and other supplies, parts and

WORK IN PROCESS INVENTORIES:

These are semi finished, work in progress and partly finished

Inventories’ cost are traditionally

When a demand arises which cannot be satisfied from available inventory

 Lost customer cost

Inventory control is the means by which materials

•Determination of the limits of the inventories to be held.

•Determination of inventory policies.

•Selling out of investments pattern and its regulations as per

•Follow up to examine the work of inventory policy and effect

SCOPE OF INVENTORY CONTROL

Determination Determining Determining

• To ensure smooth flow of stock.

• To provide for required quality of material s.

•To control investments in stock.

• Protection against fluctuating demand.

• Protection against fluctuations in output.

• Minimization of risk and uncertainty.

•Minimization of material cost.

You might also like