By- Vaibhav Kondekar

Shikha Patel
Mayank Budakoti
 INVENTORY MANAGEMENT
 INVENTORY CONTROL SYSTEM
 INVENTORY PLANNING AND ACCURACY
 A stock of any item or resources used in an
organization.
Types:
1. Raw material.

2. Work in progress.

3. Finished goods.

4. Supplies, tools & spares.

 Set of policies and controls that monitors level
of inventory
 Determine what level should be maintained.
 When stock should be replenished.
 How large orders should be.
 To meet variation in product demand.
 To allow flexibility in production scheduling.
 To provide a safeguard for variation in raw
materials delivery time.
 To take advantage of economic purchase order
size.
 Holding Cost Ordering Cost
 Warehousing or storage  Quotation or tendering
 Handling  Order placing
 Clerical and staff  Transportation
 Insurance  Quality control
 Interest  Receiving, inspecting
 Cost of capital and storing
Stock-out Cost
 Loss of sale
 Failure to meet delivery
commitments
 Single Period Inventory Model
 Multi period Inventory Systems
- Fixed order quantity model
- Fixed time period model
 Price Break Model
When one time purchase of an item is made.

C(o)= cost per unit of demand over estimated

C(u)= cost per unit of demand under estimated
By introducing probability:
P = Probability that the unit P*C(o) < (1-P)*C(u)
will not be sold.
P < C(u)
(1-P) = Probability that the C(o)+C(u)
unit will be sold.
FIXED ORDER QUANTITY MODEL (Q-MODEL)
 Q - constant ( same amount ordered each time)
 R – when the inventory position drops to the
recorded level.
 Each time a withdrawal or addition is made
 Types of item- higher priced, critical or
important items.

Total annual cost = annual purchase cost + annual

ordering cost + annual holding cost
 Q - varies each time order is placed.
 T- when the review period arrives.
 Counted only at review period.
 Typically used with lower cost items.

Order quantity= avg demand over the vulnerable

period + safety stock – inventory currently on
hand(plus on order if any)
 This model is useful for finding the order
quantity of an item when the price of an item
varies with the order size.
 Economic order quantity for each price is
calculated at the point of price change , to
determine the optimum quantity of any item to
order.
 ABC CLASSIFICATION
 ABC classification is a ranking system for
identifying and grouping items in terms of
how useful they are for achieving business
goals.
 The system requires grouping things into three
categories:
A. Extremely important
B. moderately important
C. Relatively unimportant
 Divides inventory into dollar volume categories that
map into strategies appropriate for the category.

 ABC classification is most often associated with

inventory control ,but the system can also be used to
rank things such as which customers are most
important ,which business segment cause the most
financial risk, which employees are most valuable.
 The inventory accuracy KPI compares the
accuracy of your inventory by taking a
headcount of items in stock and comparing it
to what’s recorded in your database.
 This KPI requires you to perform headcount of
inventory to ensure that your bookkeeping and
data management practices are in order.
 KPI – key performance indicator.
 Cycle counting is a physical inventory taking
technique in which inventory is counted
frequently rather than once or twice a year.
 The easiest time for stock to be counted is when
there is no activity in the stockroom or on the
production floor.
 Counting cycle depends upon the available
personnel.
 Some firm strive for 100% accuracy, whereas
others accept a 1, 2, 3% error.
THANK YOU