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Inventory

This document discusses inventory control, including definitions, objectives, characteristics, importance, and analysis methods. It defines inventory as materials, parts, supplies, tools, and finished/in-process products recorded by an organization and kept in stock. The objectives of inventory control are production economics, controlling stock volume and distribution. Characteristics include absorbing shocks, being a necessary cost, and production/marketing decisions influencing inventory levels. Methods like ABC analysis categorize items into A, B, and C classes based on usage value to prioritize control efforts. The document also discusses determining optimal order quantities using economic order quantity modeling to minimize total inventory costs.

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97 views

Inventory

This document discusses inventory control, including definitions, objectives, characteristics, importance, and analysis methods. It defines inventory as materials, parts, supplies, tools, and finished/in-process products recorded by an organization and kept in stock. The objectives of inventory control are production economics, controlling stock volume and distribution. Characteristics include absorbing shocks, being a necessary cost, and production/marketing decisions influencing inventory levels. Methods like ABC analysis categorize items into A, B, and C classes based on usage value to prioritize control efforts. The document also discusses determining optimal order quantities using economic order quantity modeling to minimize total inventory costs.

Uploaded by

sai
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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INVENTORY:

Inventory means all the materials,parts,supplies,expense tools and in process or finished


products recorded on the books by an organisatiion and kept in its stocks,warehouses or
plant for some period of time.
Inventory control is defined as “the supervision of procurement, storage and accessibility of
items in order to ensure an adequate supply of medicines in right time.”

OBJECTIVES OF INVENTORY CONTROL

•For production economics.


•Control of stock volume.
•Control of stock distribution

CHARACTERISTICS OF INVENTORY:
The concept of inventory and its relation with performance of any system can be very well
explained by the following statement.
•Inventories serves as cushions to absorb shocks.
•Inventory for any organization is a necessary evil.
•Inventory provides production economies.
•Marketing, production, finance and purchasing decisions
directly influence the level of inventory.

Importance of inventory to an organization can be listed as


•Provides and maintains good customer service.
•Enables smooth flow of goods through the production process.
•Provides protection against the uncertainties of demand and supply.
•Various production can be performed economically and independently.
•It can allow temporary variations in operating rates.
•Ensures a reasonable utilization of equipment and labor.
•With purchases in bulk discount can be availed.

STEPS FOR INVENTORY CONTROL IMPORTANCE

1. Selection of the medicines


2. Determining the quantity required(cycle stock ,buffer or saftey stock)
3. Procurement of the medicines
4. Selection of the supplies Contractterms
5. Monitoring the order status Check the received medicines Payments to the vendors
6. Storage of medicines
7. Product list
8. Order list

A.B.C ANALYSIS:
ABC method of inventory control is also called as “Always
Better Control” method.

PRINCIPLE:
•It is based on the concept “Thick on the best and thin on the rest”.
•It is observed that any organisation have to stock and keep track of large nmber of items
of different kind.
Annual usage value = (Annual Requirement) p e r unit cost
In ABC analysis the items are categorised in three main categories on the basis
of their usage value.
More costly and valuable items are classified as A:
say 10% of the items account for 75% of total capital invested in inventory.
• These items need more closer and careful control.
• These items have high inventory cost and frequent order of small size for
these items can result in enormous savings.
• These are large investment items but not much in number that is vital few

Average usage value items are classified as B :


• About 15% of the items in an inventory account for 15% of the total investment.
• Those items are less important than A class items bt havecostly enough to items cannot
be overlooked but need lesser degree of control than those in class A.
Low usage vale items are kept in class c:
About 75% of the inventory items account for only 10% of the invested capital.
• These items can be stored at an operative place where people can help themselves
without any requisition formality.
• Loose control of ‘C’ items will increase their investment and expenditure on shelf wear,
obsolescence and wasteful use.

APPLICATIONS OF ABC ANALYSIS:


• ABC analysis can be effectively used in material management .
• The various stages where it can be applied are
• To evolve useful reordering strategy
• Stock records Priority treatment to different items
• Determination of safety stock limits
VED ANALYSIS
In VED method ( vital, essential, desirable) the degree of criticality can be stated as the
material is vital to process of production, or essential to the process of production or
desirable for process of production.
Vital:-
Items without which treatment comes to standstill i.e. non-availability cannot be tolerated
The vital items are stocked in abundance, essential and very strict control
It is also known as purchasing cost or acquisition cost
•It involves cost of inventing questions , deciding the supplies issuing purchasing order fellow of etc..
•There are also inspection cost , and cost of receiving the items.
•It is also defined as itemised list of medicines procured in right quantity , right
quality , At right time in right price from right suppliers.

EOQ
•One of most effective techniques for determination of quantity is economic
order quantity.
•The basic objective of E.O.Q is to have an ideal order quantity
•For any item and to ecnomise on the cost of purchase
•Managing of inventory depends on 2 factors:

Ordering cost
•It involves cost of inventing questions , deciding the supplies issuing purchasing
order fellow of etc..
•There are also inspection cost , and cost of receiving the items.
•It is also defined as itemised list of medicines procured in right quantity , right
quality , At right time in right price from right suppliers.

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