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Presentation 10

This document discusses inventory management. It defines inventory management as the process of ordering, storing, consuming, and selling a company's inventory. The key goals of inventory management are to identify what to order, when to order, how much to order, and where to store items. It describes several tools and techniques for inventory management, including the ABC method for classifying items based on their value and importance, economic order quantity (EOQ) for determining optimal order sizes, and formulas for calculating minimum, reorder, and maximum inventory levels.

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Ravjot Kaur
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17 views14 pages

Presentation 10

This document discusses inventory management. It defines inventory management as the process of ordering, storing, consuming, and selling a company's inventory. The key goals of inventory management are to identify what to order, when to order, how much to order, and where to store items. It describes several tools and techniques for inventory management, including the ABC method for classifying items based on their value and importance, economic order quantity (EOQ) for determining optimal order sizes, and formulas for calculating minimum, reorder, and maximum inventory levels.

Uploaded by

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

Submitted By:- Ravjot Kaur


Sharanjeet Sidhu
Submitted To:- Mrs.Roopali Batra
Mam
What Is Inventory Management?

The process of Ordering, Storing,


Consuming and selling Company's
Inventory.

It Helps to identify:
 What to order,
 When to order,
 How much to order,
And where to store the order.
• Tools And Techniques Of Inventory
Management
ABC Method

• ABC: Always Better Control


• Or Propotional Part Value Method

• Concentrates on important items and thus also


reffered to as Control by Importance and
Exception.

• Material are classified into three Categories:


A, B & C
ABC Method

• Group A : Constitutes costly items which are


10 to 20%of the total items and may account
for about 50% of the total value of stores

• Group B : Constitutes 20 to 30% of the stores


items and represent 30% of the total value of
Stores

• Group C : Constitute to 70 to 80% of the items


are covered costing about 20% of the total
Value
Economic Order Quantity (EOQ)

• Economic order quantity is the size of an order


that businesses and organisations use to
understand how much inventory is necessary
to stock in stores.

• The EOQ is that inventory level which


minimise the total of ordering and carrying
costs.

• The quantity to be purchased should neither


be small nor big.
Determinants of EOQ
• Ordering Cost
it is the cost of ordering or purchasing and
receiving the inventory.
Example:- Salary of purchase department,
Transportation costs.
• Carrying Cost
Carrying cost is the cost a business incurs for
"carrying" or storing inventory.
Example:- Warehouse cost,
Employees salaries
• Annual Demand
The annual demand is the number of units that
you sell annually.
• Assumptions of EOQ

• The ordering cost is constant.


• The lead time is fixed.
• There is no quantity discount.
• The rate of demand is constant.
• The replenishment is made
instantaneously; the whole batch is
delivered at once.
Graphic Approach

• EOQ occur at the point mentioned in the graph,


where the total cost is minimum.
• EOQ is the order quantity that minimizes total
inventory holding costs and ordering costs.
EOQ Formula

• D = Raw Material
Demand
• Co = Cost of order
Per unit
• Cc = Cost of
Carrying
Levels of Inventory

The Amount of inventory you have available


throughtout your entire distribution network.
 MINIMUM LEVEL :- If the stock are less than the
minimum level, the work will stop due to shortage of
material.
 RE-ORDER LEVEL :- The level when the business
concern makes fresh order at this level.
 MAXIMUM LEVEL :- If the quantity exceeds maximum
level limit then it will be overstocking.
 DANGER LEVEL :- It is the level below the minimum
level. It leads to stoppage of the production process.
Formulas
• Minimum Level = Re-order Level -
(Average Usage × Average Lead Time)

• Re-Ordering Level = Maximum Rate of


Consumption × Maximum reorder period

• Maximum Level = (Reorder Level +


Reorder Quantity) - ( Minimum Usage ×
Minimum Reorder Period)
FSN Analysis

It looks at the quantity, Consumption rate and how


often the item is issued and used.
 Fast Moving
The items which are frequently required and issue
on the continous basis from the store room.
 Slow Moving
Those items which are moderately required and
issued after regular interval from store room.
 Non-Moving
Items which are rarely required.
Thank You

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