Inventory control involves maintaining desired inventory levels to balance economic interests. It covers recording all materials, parts, expenses, work-in-progress and finished goods. Effective inventory control requires techniques like setting maximum-minimum levels, reorder points and economic order quantities. ABC analysis also categorizes items for different control based on cost and importance. Maintaining accurate records through tools like bin cards or ledgers then allows reconciling physical and book inventory amounts.

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Topic

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All the materials , parts, suppliers, expenses and in
process or finished products recorded on the books
by an organization and kept in its stocks,
warehouses or plant for some period of time.

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Inventory control is the technique of maintaining
the size of the inventory at some desired level
keeping in view the best economic interest of an
organization.

4. Type of Inventory Reason for holding the Inventory
(1) Raw materials
To reap the price advantage
available on seasonal raw
materials.
(2) Work in progress To balance the production flow.
(3) Ready made components When the components are bought rather
than made.
(4) Scraps They are disposal of in bulk.
(5) Finished Goods Lying in stock rooms and waiting
dispatches
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 Protection against fluctuations in demand;
 Better use of men, machines and material;
 Protection against fluctuations in output;
 Control of stock volume;
 Control of stock distribution.

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Planning the inventories;
Procurement of inventories;
Receiving and inspection of inventories;
Storing and issuing the inventories;
Recording the receipt and issues of
inventories.
Physical verification of inventories;
Follow-up function ;
Material standardization and substitution.

7. Executive decide two basic issues while dealing with inventories;
(a) How much of an item to order when the inventory of that item is to be
replenished.
(b) When to replenish the inventory of that item.
By definition, inventory facilitate production or satisfy customer
demands.
Inventory system is a set of policies and controls which monitors and
determines the levels of inventory. Inventory conventionally include raw
materials, work-in-progress, components parts, supplies and finished goods.
Operations is a transformation process in which the inputs are raw materials
and output is the finished goods.
Suppliers Raw materials Finished good customers.
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Production
Work-in-progress

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Inventory level
Supply
rate
Demand
rate

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 Deciding the maximum- minimum limits of
inventory;
 Determination of Reorder point;
 Determination of reorder quantity;
 Perpetual inventory control;
 ABC analysis;
 Method of control through turn over.

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 Quantity of inventory above which should not be
allowed to be kept. This quantity is fixed keeping in
view the disadvantages of overstocking;
Factors to be considered:
 Amount of capital available.
 Godown space available.
 Possibility of loss.

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 Cost of maintaining stores;
 Likely fluctuation in prices;
 Seasonal nature of supply of material;
 Restriction imposed by Govt.;
 Possibility of change in fashion and habit.

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 This represents the quantity below which stocks
should not be allowed to fall .
 The level is fixed for all items of stores and the
following factors are taken into account:
1.Lead time-
2. Rate of consumption of the material during the
lead time.

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 It is the point at which if stock of the material in
store approaches, the store keeper should initiate
the purchase requisition for fresh supply of
material.
 This level is fixed some where between maximum
and minimum level.

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 It is also known as standard order quantity ,
optimum quantity or economic lot size.
 By definition economic order quantity that size of
order for which the total cost is minimum.

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 The widely used formula is
EOQ =√{2RCp/Ch}
Where ,
R= Annual quantity to be used in units.
Cp=Cost of placing an Order.
Ch= cost of holding one unit for one year.

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It is efficient control of stores requires greater in
case of costlier items.

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Item
Item Quality
Quality Quantity order
Quantity order Checking
Checking
A
A Costlier
Costlier Less
Less Regular system to see
Regular system to see
that there is no
that there is no
overstocking as well as
overstocking as well as
that there is no danger
that there is no danger
of production being
of production being
interrupted for
interrupted for
unwanted material.
unwanted material.
B
B Less costlier
Less costlier Order may be on
Order may be on
review basis.
review basis.
Position being viewed
Position being viewed
in each month
in each month
C
C Economical
Economical Larger
Larger Order in large quantity
Order in large quantity
so that cost can be
so that cost can be
avoided
avoided

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 Stores ledger, stores control, cards or bin cards are
properly maintained ;
 Quantity balance store shown in the store ledger;
stock control and bin cards are reconciled;
 Exploring the cause of discrepancies if any physical
balances and book balances.

20. Daily Inventory Balance Record Product
Month Year
1 2 3 4 5 6 7
Opening Physical
Inventory
Deliveries Meter Sales Inventory Should Be Physical Inventory Variation Today Variation This
Month
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
TOTALS
Day
Balance sheet is were information
is calculated to determine losses
and gains from daily sales. This is a
very important part of fuel
management it will give you
important records of sales (this is
inventory control).

21. Daily Readings Product
Month Year
Readings Sales Readings Sales Readings Sales Readings Sales
Dip
cm.
Inventroy
litres
Water Dip
cm.
Dip
cm.
Inventroy
litres
Water Dip
cm.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
Total
Physical
Inventory
Day
Total
Meter
Sales
Tank 1 Tank 2
Pump 1 Pump 2 Pump 3 Pump 4
This is were information collected from
meter totals and tank dips are added and
recorded.

22. Month
Total
Sales
Variation
for Month
% Loss
Total
Sales
Variation
for Month
% Loss
Total
Sales
Variation
for Month
% Loss
Monthly Summary
Product Product
Storage Capacity
Product
Storage Capacity
Storage Capacity
This is were we record our calculated losses and gains for every
individual month. This sheet is used for the years sales report.
Will give you sales of individual months. Record keeping is a
important method of tracking your inventory.

23. It means how many times a company’s
inventory is sold and replaced (finished
product)
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24. Inventory ratio (Raw material)-
The value of material consumed during a
period
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Average value of inventory during that period
High ratio = fast moving stock

25. YOUR CRITICAL ANALYSIS
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Thank you