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Inventory Control System: by Aditya Mahajan Retail Management (1 Year) 25037

This document discusses inventory control systems. It defines inventory as items held by a business for sale to earn a profit. There are different types of inventory including raw materials, work in progress, and finished goods. The document outlines several methods for inventory control including just-in-time, ABC analysis, economic order quantity, demand forecasting, and VED analysis. It notes that effective inventory control can lower costs, improve cash flow, reduce stockouts, increase customer satisfaction, reduce wasted inventory, reduce project delays, and expand understanding of the business.

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Vishal Kumar
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48 views12 pages

Inventory Control System: by Aditya Mahajan Retail Management (1 Year) 25037

This document discusses inventory control systems. It defines inventory as items held by a business for sale to earn a profit. There are different types of inventory including raw materials, work in progress, and finished goods. The document outlines several methods for inventory control including just-in-time, ABC analysis, economic order quantity, demand forecasting, and VED analysis. It notes that effective inventory control can lower costs, improve cash flow, reduce stockouts, increase customer satisfaction, reduce wasted inventory, reduce project delays, and expand understanding of the business.

Uploaded by

Vishal Kumar
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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INVENTORY

CONTROL SYSTEM

BY ADITYA MAHAJAN
Retail management (1st year)
25037
WHAT IS INVENTORY ?

Inventory refers to all the items, goods, merchandise, and materials held
by a business for selling in the market to earn a profit.

Inventory management - In order to ensure that you have enough stock


on hand and to identify when there’s a shortage.

Inventory control is a scientific which indicates as to what to order


when to order and how to order , and how much to stock so that
purchasing costs and storing costs are kept as low as possible.
TYPES OF INVENTORY
 Raw Materials: Raw materials are the materials a company uses to
create and finish products. A raw material, also known as a feedstock,
unprocessed material, or primary commodity, is a basic material that
is used to produce the finish goods.
 Work In Progress (WIP) inventory refers to materials that are
waiting to be assembled and sold. WIP inventory includes the cost of
raw materials, labor, and overhead costs needed to manufacture a
finished product.
 Finished Goods: Finished goods are items that are ready to sell.
 Maintenance, Repair and Operations (MRO) Goods: MRO is
inventory — often in the form of supplies — that supports making a
product or the maintenance of a business.

 Packing and Packaging Materials: There are three types of packing


materials. Primary packing protects the product and makes it usable.
Secondary packing is the packaging of the finished good and can include
labels or SKU information. Tertiary packing is bulk packaging for
transport.
METHODS OF INVENTORY CONTROL SYSTEM

 Inventory control is a scientific which indicates as to what to order , when to order and how to order , and
how much to stock so that purchasing costs and storing costs are kept as low as possible. It can be done by
following methods :-

1) JUST- IN- TIME (JIT) :- Is a Japanese technique of inventory management, in this technique an inventory
management method in which goods are received from suppliers only as they are needed. The main objective of
this method is to reduce inventory holding costs and increase inventory turnover. the company maintains only
such quantity of inventory as it requires during the manufacturing/production process. It implies no excess
inventory in hand and saves the cost of warehousing, shipping, insurance and another allied cost.
 JIT delivery leads to reduction in costs and improves efficiency and profit margins in the following ways:

 Decreased inventory levels

 Reduced labour cost

 Stock reduction

 Increased productivity

 Improved quality
2) ABC ANALYSIS :-
This technique splits goods into three categories to identify
items that have a heavy impact on overall inventory cost.
Category A is your most valuable products that contribute the
most to overall profit.
Category B is the products that fall in between the most and
least valuable.
 Category C is for small transactions that are vital for overall
profit but don’t matter much individually.
Categories of ABC Analysis

ABC analysis
Segment A: Products included in category A are the most essential
goods with the highest value. Segment A goods consist of
approximately 20% of the total products with 80% of revenue
generation for your business. It is considered as a small category
with minimal goods, but maximum revenue.

Segment B: Products included in category B have a slightly


higher value than segment B. It approximately regulates 30% of
goods with 15% revenue generation. Not to mention, the goods
included in this category are more in number but less in utility.

Segment C: Products included in category C are more in numbers


but least valuable when it comes to generating revenue. As
compared to category A & B, segment C has the maximum share
of 50% of the stock, generating just 5% revenue.
To sum it up, A signifies the most important goods, B indicates
moderately necessary goods, and C indicates the least essential
inventory.
3) Economic Order Quantity (EOQ) Model

In this inventory management technique, a company focuses on the decision regarding how
much quantity of inventory should be ordered and when the order should be placed. In this
technique, the stock of inventory is re-ordered when it reaches the minimum ordering level.
This inventory management technique saves the carrying and ordering cost incurred while
placing the order.

4)Demand forecasting
Demand forecasting (or sales projections) helps you understand how much of each
product you need to have on hand at all times to meet customer demand . For
established businesses, demand forecasting should be based on historical sales data.
Demand forecasting is essential to inventory management because it helps you
determine the minimum amount of a product you should have on hand and set
reorder targets when you reach that number.
5) VED Analysis

VED analysis in inventory management deals with the classification of materials based on
their importance to other materials.
Vital (V): These are essential materials whose non-availability while putting a halt to
business operation. These materials need to be in stock at all times else, production will be
affected.
Essential €: This refers to materials that you require a certain amount of. You just require a
minimum amount of them to keep production active.
Desirable (D): This refers to materials that do not really affect production. Production can
run with or without these materials.
The best example of the VED classification of inventory is medical inventory.
Hospitals need to keep updating and maintaining the stock of medicines required by
patients.
BENEFITS OF INVENTORY CONTROL SYSTEM

Inventory analysis raises profits by lowering costs and supporting


turnover. It also:
Improves Cash Flow: Inventory analysis helps you identify and
reorder items you sell often, so you don’t spend money on inventory
that moves slowly.
Reduces Stockouts: When you understand which inventory customers
want most, you can better anticipate demand and prevent stockouts.
Increases Customer Satisfaction: Analyzing inventory offers insight
into what and how customers purchase goods.
Reduces Wasted Inventory: Understanding what, when and how much
people buy minimizes the need to store obsolete products, as well as
when products expire so you can have a strategy behind using them.

Reduces Project Delays: Learning about supplier lead times helps you
understand when to reorder and how to avoid late shipments.

Expands Your Understanding of the Business: Reviewing inventory


provides insights into your stock, customers and business
THANKYOU

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