INVENTORY CONTROL Explained By Sarbjit Kaur Lecturer Department

INVENTORY CONTROL Explained By: Sarbjit Kaur. Lecturer, Department of Computer Application, PGG. C. G. , Sector: 42, Chandigarh

NEED OF INVENTORY CONTROL � TO ENSURE CONTINUOUS SUPPLY : IT IS REQURIED SO THAT PRODUCUTION SHOULD NOT SUFFER AT ANT TIME AND THE CUSTOMERS DEMAND SHOULD ALSO BE MET � TO ENSURE PROPER INVESTMENT : THERE SHOULD BE NO OVERSTOCKING AND UNDERSTOCKING AND INVETORY CONTROL HELP IN IT.

CONT’D � TOREDUSE THE MATERIAL COSTS: A GOOD INVENTORY CONTROL SYSTEM CAN LEAD TO MINIMIZATION OF MATERIAL COST. � TO MINIMIZE LOSSES: IT CAN MINIMIZE THE LOSSES OF INVENTORY THROUGH DETERIORATION WASTAGES AND DAMAGES. � TO ELIMINATE DUPLICATION : THE SAME MATERIAL CAN BE ORDERED BY DIFFERENT PERSON SO BY INVENTORY CONTROL AVOID THIS PROBLEM.

TECHNIQUES OF INVENTORY CONTROL �ABC ANALYSIS �VED ANALYSIS �AGEING ANALYSIS �FNSD ANALYSIS �HML ANALYSIS �XYZ ANALYSIS �SOS ANALYSIS �PREPECTUAL INVENTORY SYSTEM �ECONOMIC ORDER QUANTITY

PREPECTUAL INVENTORY SYSTEM � A SYSTEM OF RECORDS MAINTAINED BY THE CONTROLLING DEPARTMENT, WHICH REFLECTS THE PHYSICAL MOVEMENTS OF THE STOCK AND THERE CURRENT BALANCE. � THIS SYSTEM MAKES USE OF EXTENSIVE RECORDS , RECIPETS, ISSUSES , RETURNS ETC. OF MATERIALS ARE RECORDED IN A CONTINUOUS BASIS IN A SORED DEPARTMENT.

FNSD ANALYSIS � F-FAST MOVING ITEMS IN INVENTORYARE THOSE ITEMS WHICH ARE CONSUMED WITHIN A SHORT PERIOD OF TIME � N-NORMAL MOVING ITEMS ARE THOSE WHICH ARE CONSUMED WITHIN A YEAR. � S-SLOW MOVING ITEMS ARE THOSE STOCKS WHICH HAVE A LOW TURNOVER RATE. � D-DEAD ITEMS DENOTES TO THAT STOCK FOR WHICH NO PRESENT DEMAND EXIST AND NO FORECAST CAN BE MADE OF FUTURE DEMAND.

HML CLASSIFICATION � H-HIGH VALUE ITEMS � M-MEDIUM VALUE ITEMS � L-LOW VALUE ITEMS � IT IS USEFUL FOR KEEPING CONTROL OVER MATERIALS CONSUMPTION AT THE DEPARTMENT LEVEL. � XYZ CLASSIFICATION IN THIS THE ITEMS HAVING HIGHEST INVENTORY ARE CLASSIFIED AS X, AND WITH LOW INVESTMENT IN THEM TERMED AS Z ITEMS, OTHER ITEMS ARE Y WHOZ INVENTORY IS NITHER TOO HIGH OR LOW

SOS CLASSIFICATION �S- SEASONAL ITEMS �OS- OF SEASONAL ITEMS �IT IS USEFUL FOR DECIDING THE TIME OF PURCHASE , SO THAT THE COST OF MATERIAL AND HOLDING COST MAY B BALANCED.

ABC Analysis Any stock is segregated into different sections. These items are classified into 3 sections, A, B and C. The logic of segregating these items into sections is that section A consists of limited number of items that are very expensive. Section B has items that are not expensive and the number of units that is to be ordered is also not very large. The section C consists of numerous items, that have a low monetary value

Economic Order Quantity : � Different models take different costs into account. One of the popular model developed for items of repetitive nature (dynamic), future demands for which can be projected with certainty is Economic Order Quantity (EOQ) model. ◦ In addition to factors mentioned above, this model assumes that price of the material remains constant with time and also does not vary with order quantity. This model can be developed mathematically by differentiating total cost of with respect to Quantity. The formula so derived is given below : ◦ E. O. Q=