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    This document discusses inventory management and different inventory models. It begins with definitions of inventory and its basic types including raw materials, spare parts, consumables, and finished goods. It then introduces inventory management as planning and controlling inventories. The document discusses the need for inventory to support production, maintenance, and customer service. It also presents the economic order quantity (EOQ) model, which determines the optimal order quantity by balancing ordering and holding costs under certain assumptions. The EOQ model formula and key terms like reorder point and time between orders are defined. Finally, ABC inventory classification and cycle counting are presented as inventory control techniques.

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    DDD

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    347 views26 pages
    This document discusses inventory management and different inventory models. It begins with definitions of inventory and its basic types including raw materials, spare parts, consumables, and finished goods. It then introduces inventory management as planning and controlling inventories. The document discusses the need for inventory to support production, maintenance, and customer service. It also presents the economic order quantity (EOQ) model, which determines the optimal order quantity by balancing ordering and holding costs under certain assumptions. The EOQ model formula and key terms like reorder point and time between orders are defined. Finally, ABC inventory classification and cycle counting are presented as inventory control techniques.

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    This document discusses inventory management and different inventory models. It begins with definitions of inventory and its basic types including raw materials, spare parts, consumables, and finished goods. It then introduces inventory management as planning and controlling inventories. The document discusses the need for inventory to support production, maintenance, and customer service. It also presents the economic order quantity (EOQ) model, which determines the optimal order quantity by balancing ordering and holding costs under certain assumptions. The EOQ model formula and key terms like reorder point and time between orders are defined. Finally, ABC inventory classification and cycle counting are presented as inventory control techniques.

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    Download as pptx, pdf, or txt
    347 views26 pages

    DDD

    Uploaded by

    fahad arif
    This document discusses inventory management and different inventory models. It begins with definitions of inventory and its basic types including raw materials, spare parts, consumables, and finished goods. It then introduces inventory management as planning and controlling inventories. The document discusses the need for inventory to support production, maintenance, and customer service. It also presents the economic order quantity (EOQ) model, which determines the optimal order quantity by balancing ordering and holding costs under certain assumptions. The EOQ model formula and key terms like reorder point and time between orders are defined. Finally, ABC inventory classification and cycle counting are presented as inventory control techniques.

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    INVENTORY MANAGEMENT

    Definition
    INVENTORY is the stock of any item
    or resource used in organization.

    It may consist of Raw materials,


    Spare parts/consumable and
    Finished Goods.
    Introduction
    Inventory Management
    “The branch of business management concerned with planning and
    controlling inventories”.

    Inventory Visibility
    “The extent to which information is shared within a firm and with supply
    chain partners”.
    Introduction
    The need for Inventory ?

     Inventory: “Those stock or items used to support production (Raw


    Materials and Work in process items). Supporting activities
    (Maintenance, repair and operating supplier) and customer service
    (Finished goods and spare parts)”
     It is the necessary cost of doing business.
     Inventory can also be seen as an investment if managed correctly, can be
    strategic asset to the organization.
    Basic Types of Inventory
    Raw 
    Materi Raw  materials  are  unprocessed 
    Maintenance,  repair  and  operating  (MRO)  al
    supplies  are  materials  and  supplies  used  purchased  inputs  or  materials  for 
    when  producing  the  products  but  are  not  manufacturing the finished goods.
    parts of the products.

    Invento Work­
    MRO in­
    ry Process

    Finished  goods  are  completed  products  Work­in­process  (WIP)  describes 


    ready for shipment. materials  that  are  partially  processed 
    but not yet ready for sales.
    Finishe
    d Goods
    ABC Inventory Control Systems
     A common problem with many inventory management systems is the challenge to
    maintain accurate inventory records.
     Many organizations use cycle counting to reconcile discrepancies (Monthly /
    Quarterly)
     The ABC inventory control system is a useful technique for determining which
    inventories should be counted more frequently and managed more closely.
     ABC analysis is often combined with the 80/20 rule or Pareto Analysis.
     The 80/20 rule suggest that 80 percent of the objective can be achieved by doing 20
    percent of the task.
     Whereas the remaining 20 percent of the objective will take up 80 percent of the task.
    ABC Inventory Control Systems
    ABC Inventory Classification
    Inventory Models
    The Economic Order Quantity Model (EQM)
    Users must carefully consider the following assumptions when determining the economic order
    quantity:

    1. The demand is known and constant.( For Instant 2 units per day for entire year )
    2. Order lead time is known and constant ( Delivery lead time 10 days fixed )
    3. Replenishment is instantaneous ( Partial Shipments are not allowed )
    4. Price is Constant ( Quantity or Price Discounts are not allowed )
    5. The holding cost is known and constant ( Inventory holding cost )
    6. Order cost is known and constant ( Placing an order cost must be constant )
    7. Stock-outs are not allowed. ( Inventory must be available all the time )
    Economic Order Quantity Model (EQM)
    The Economic Order Quantity Model Formula
    Annual Requirement = R
    Cost of Placing one Order = S
    Purchase cost per unit = C
    Holding Rate = K where annual holding cost per unit = K × C
    Quantity = Q
    Annual Purchase cost = R × C
    Annual Holding Cost = (Q/2) × K × C
    Annual Ordering Cost = (R/Q) × S
    Total Annual Inventory Cost = Annual Purchase Cost + Annual Holding Cost + Annual Order
    Cost
    Reorder point (ROP) = (Annual Units Required / 365) × Lead Time.
    Number of Orders placed per year = Annual Unites Required/ EOQ
    Time Between Order = Days per Year / Number of Order placed per year.
    Economic Order Quantity Model (EQM)

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