simple basic presentation on inventory management

1. INVENTORY MANAGEMENT
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Rahul Sunda
110629

2. CONTENTS:-
 1.INTRODUCTION
 2.OBJECTIVE
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 3.IMPORTANT TERM USED IN INV.MNG.
 4.PRESSURE FOR LOW &HIGH INVENTORY
 5.TWO FORMS OF DEMAND
 6.TYPES OF INVENTORY
 7.CHALLANGES IN I.M.
 8.TECTICS USED TO CONTROL INVENTORY
 9.EOQ ANALYSIS
 10.ABC ANALYSIS
 11.INVENTORY CONTROL SYSTEM
 12.P&Q SYSTEMS 2

3. 1/25/2013
INVENTORY
Inventory is anything which can be store for
future needs or demand, it can be in any form like
man, machine, raw material, machine hours ,
finished goods etc.
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4. INVENTORY MANAGEMENT
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 Inventory management, is the planning and
controlling of inventories in order to meet the
competitive priorities of the organization, is an
important concern for managers in all types of
businesses.
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5. INTRODUCTION CONTINUED
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 Inventory control is concerned with achieving
an optimum balance between two competing
objectives.
1) Minimizing the investment in inventory.
2) Maximizing the service levels to customer’s
and it’s operating departments.
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6. INVENTORY ACT AS A CUSHION
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If Operation has full of problem , like labour
absenteeism is high worker’s moral is also low ,
equipment working is not so good , logistic system
is not so good , than also if a company has very
excess amount of inventory , then no-one knows
about these problem.
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7. OBJECTIVES
The specific objectives of inventory management are
as follow:
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a) Keeping the production on as on-going basis.
b) Preventing idleness of men, machine .
c) Utilizing of scare resources (capital) and investment
judiciously.
d) Avoiding risk of loss of life (moral & social).
e) Giving satisfaction to customers in terms of quality-
care, competitive price and prompt delivery.
f) Inducing confidence in customers and to create trust
and faith.
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8. IMPORTANT TERM USED IN I.M.
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 Lot Size:- The quantity of an inventory item
management either buys from a supplier or
manufactures using internal processes
 SKU:- An individual item or product that has an
identifying code and is held in inventory
somewhere along the supply chain.
 Reorder Point:-it is that point where new order is
placed & it is dependent on lead time
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9. PRESSURE FOR INVENTORY
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 A Manager consistently dealing with low and
high inventory according to the nature of product,
customer demand, supplier efficiency , lead time.
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10. PRESSURE FOR LOW INVENTORY
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 Cost of Capital:-
(a) Opportunity cost
(b) Total Holding Cost
 Taxes
 Insurance
 Shrinkage
 Storage
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11. PRESSURE FOR HIGH INVENTORY
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 Customer Side
 Set up cost
 Ordering Cost
 Labour/equipment utilization
 Transportation Cost
 Payment to Suppliers
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12. TWO FORMS OF DEMAND
 Dependent
 Demand for items used to produce final products
and that is influence by other item.
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 Tires stored at a plant are an example of a
dependent demand item.
 Independent
 Demand for items used by external
Customers , that don’t influence by other
Item.
EX. Cars, appliances, computers, and
houses are examples of independent
demand inventory.
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13. DEMAND CONTINUED
Independent Demand
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A Dependent Demand
B C
D E D F
Independent demand is uncertain.
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Dependent demand is certain.

14. TYPES OF INVENTORY
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 By using the concept of what is order size and
what is time between the order or lot size ,
Inventory are of 4 types:-
 Cycle Inventory
 Anticipation Inventory
 Safety Inventory
 Pipe Line Inventory
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15. CYCLE INVENTORY
 Cycle inventory related with concept of LOT size , it is that
portion of inventory which varies directly with LOT size.
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 So it directly depends on cycle time or LEAD time(time
between two orders)
 Average cycle inventory(when demand rate is
constant)=q+0/2=q/2
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16. CYCLE CURVE
Profile of Inventory Level Over Time
Q
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
Deman
d
rate
Quantit
y
on hand
Reorder
point
Time
Receive Place Receive Place Receive
order order order order order
Lead time 16

17. SAFETY STOCK INVENTORY
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 Surplus Inventory that protects against
uncertainties in demand , lead time ,and supply
changes.
 It also avoid customer service problems and in
the emergency situation.
 It achieve through two ways:-
 1.before lead time order is placed.
 2.more order is placed.
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18. ANTICIPATION INVENTORY
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It is that part of Inventory which is held for meet in
peak season demand , so this type of Inventory is
intensely created because a certainty is there that it
will consume in peak season.
It also help when suppliers are threatened with a strike
or have severe capacity limitations.
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19. PIPE LINE INVENTORY
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 Inventory that is created when an order for an
item is issued but not yet placed in inventory.
 It exists in the form of materials that move from
supplier to a plant , from one operation to the
next in the plant ,or plant to a customer, or from
the distribution centre to a retailers.
 Longer lead time or higher demand at a frequent
time create more pipe line inventory.
 pipe line inventory=d.L
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20. CHALLENGES IN I.M.
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 What is in the Stock ?
 What quantity of a single product is available?
 Where it is being held ?
So big retail chain stores like Walmart
(U.S.A.) ,Tesco (U.K.), Carrefour(France) used
RFIS System.
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