LOGISTIC MANAGEMENT CLASSBBA FINALVI SEM TOPICINVENTORY MANAGEMENT I

LOGISTIC MANAGEMENT CLASS--BBA FINAL(VI SEM. ) TOPIC-INVENTORY MANAGEMENT I. B (PG) COLLGE, PANIPAT UNIVERSITY- KURUKSHETRA UNIVERSITY, KURUKSHETRA. DEPT. OF COMMERCE AND MANAGEMNET BY PROF. -SONIA VIRMANI

INVENTORY MANAGEMENT • Inventory includes: -Raw material, work in progress, components, parts and equipments, finished goods. • Inventory Management: -Inventory management is the supervision of non-capitalized assets and stock items. • Inventory management determines: -What to purchase. • How much to purchase, from where to purchase, where to store.

Types of inventory: • Raw material: -Materials and components for use in making product. • Work in process: -Materials and components that have begun their transformation to finished goods. • Finished goods: -Goods ready for sale to customer. • Spare parts: -parts of the goods.

Objectives of Inventory Management: Continuous supply of raw material. Minimize the inventory cost. Maintain sufficient goods for smooth sales operation. Maintain sufficient stock of raw material in period of short supply. • To complete the order by keeping inventory. • Control inventory investment by maintaining optimum • • inventory.

Functions of Inventory Management: • Inventory control: -handles the inventory. • Primary function: -to get the maximum investment for the business investment. • Balancing supply and demand: -When the demands arise supply must be available. • Safety stock: - Having a buffer stock in case of an unexpected delay in inventory or sales.

Cost associated of Inventory Management: • Carrying cost: -It is the cost of holding goods in stock like cost connected directly with material financial cost, capital cost, handling cost. • Ordering cost: -order cost= (Annual demand x order cost)/order qty in units. • Out of stock cost: -Such cost consists of internal cost like delay in time wastage. • Capacity cost: -Company’s ability to produce goods.

EOQ Analysis: • EOQ is the level of inventory that minimizes the total inventory holding cost. • It is one of the oldest classical production scheduling model. • Economic or optimum lot size: • • The ordering cost is constant. • The rate of demand is constant. • The lead time is fixed. • The purchase price of the item is constant i. e. no discount is available. • EOQ is the levels of the inventory where ordering cost and carrying cost remains equal.

Modern techniques of inventory cost control: • ABC analysis: - it ensures a closer and more strict control over such items, which help in overall inventory valuation or overall material consumption. • VED analysis: - Vital, essential and desirable analysis.

Relationship between ABC analysis and VED analysis: ABC classification A B C VED classification V Constant control, low cost, Follow up. Moderate stock. No risk of stock out. High stocks, restricted order, no risk. E Average stock: no risk of stock out Average stock D No stock. Very low stock some risk can be taken. Average stock, Low stock: some risk can be taken.

Modern techniques of inventory cost control: • FSN Analysis: -Items are classified based on consumption and average stay in the inventory. • F- Fast moving. • S- Slow moving. • N- Non moving. • HML Classification: -The items are classified as their cost per unit is H-high, M-medium, L-low. • This type is useful for keeping control over materials consumption at the departmental level.

XYZ Analysis: - In this analysis items whose inventory values are highly classified as X. whose are low investment on termed as Z items. Other items are Y items whose inventory value is neither too high nor too low. THANK YOU