Inventory mnagement - Jobin Joseph
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Transcript of Inventory mnagement - Jobin Joseph
MANAGEMENT CONCEPTS
Jobin Joseph
INVENTORY MANAGEMENT
Jobin JosephNo : 115
DEFINITION OF INVENTORY MANAGEMENT
Inventory is a list for goods and materials, or
those goods and materials themselves, held
available in stock by a business.
A stock of items held to meet future demand.
Jobin Joseph
INTRODUCTION
The meaning of inventory is stock of goods.
In accounting language it may include:
Raw material
They are required to carry out production activities
successively
Meaning of inventory
Jobin Joseph
Work-in-progress
It is a stage of stocks between raw material & finished goods.
Consumables
These are needed to smoothen the process of production
Finished goods
These are the goods which are ready for the consumers
Spares
Form a part of inventory
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PURPOSE/ BENEFITS OF HOLDING INVENTORIES
� Transaction Motive :- To facilitate Continuous
Production.
Speculative Motive :- For taking advantage of price fluctuations, saving in re-ordering costs and quantity discounts, etc.
Precaution Motive :- For meeting unpredictable changes in demand and supplies of materials
Jobin Joseph
INVENTORY MANAGEMENT
An efficient system of inventory management will determine.
What to purchase
How much to purchase
From where to purchase
Where to storeJobin Joseph
OBJECTIVES OF INVENTORY MANAGEMENT
To ensure continuous supply of raw material, spares and finished goods.
To avoid both over stocking and under stocking of inventory.
To maintain investments in inventories at optimum level.
Jobin Joseph
To eliminate duplications in orders.
To keep material cost under control.
To minimize losses through wastage and damages.
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Tools of inventory management
Stock Levels
Safety Stocks
Ordering System of Inventory
Determination of EOQ
ABC Analysis
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VED Analysis
Inventory Turnover Ratio
Aging Schedule of Inventories
Classification & Codification on Inventories
Inventory Reports
Jobin Joseph
Techniques of inventory management
Determination of stock level
Minimum level = reordering level-(normal consumption * normal reordering period )
Maximum level = reordering level+ reordering quantity + (minimum consumption * minimum reordering period )
Danger level = consumption * maximum reorder periodJobin Joseph
Cntd..
Determination safety stocks:
Safety stock is a barrier to meet some surprising increase in usage.
Jobin Joseph
TWO COST ARE INVOLVED IN DITERMINATION
1.Opportunity cost of stock outs
2.Carrying cost
Inventory Turn Over Ratio = Cost of good sold/Average inventry at cost
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Economic Order Quantity
EOQ is the size of the portion to be purchased which is economically viable
EOQ is made up of 2 parts
1. Ordering cost-These cost are associated with the purchasing or ordering of the material
2. Carrying cost- these are the cost for holding the inventories
Jobin Joseph
A-B-C ANALYSIS:
The materials are divided into three categories via, A, B&C
Group A
Under this almost 10% of the items contribute to70% of value of consumption.
Jobin Joseph
Group B
Under this category 20% of the items contribute about 20% of value of consumption.
Group C
Under this category about 70% of items of material contribute only 10% of value of consumption.
Jobin Joseph
VED ANALYSIS
The VED analysis is used generally for spare parts.
The requirements and urgency of spare parts is different from that of materials.
Spare parts are classified as vital(V),essential(E),desirable(D)
Jobin Joseph
INVENTORY REPORTS
The management is kept informed with the latest
stock position of different items by preparing
periodical inventory reports. On the basis of these
reports management takes corrective action
wherever necessary.
Jobin Joseph
THANK YOU
Jobin Joseph