ITFT-- Inventory management

Inventory Management

• Inventory is material that the firm obtains in advance of need, holds until it is needed, and then uses, consumes, incorporates into a product, sells or otherwise disposes it of .

Types of Inventories

Raw Material Inventories

Types of Inventories

Work In Process Inventories

Types of Inventories

Spare Part Inventories

Types Of Inventories’

Finished Inventories

Cycle Stock and safety stock

•

Classification Of Inventories Cost

Purchase Cost

the cost which the firm pays to its vendor.

Per /unit

Classification Of Inventories Cost

Ordering Cost

Cost incurred whenever we order or reorder the inventory.

Cost involved in processing the order

e.g administrative cost

Classification Of Inventories Cost

Holding cost

the cost that accrue due to the actual holding of inventory over a time period.

Classification Of Inventory Cost

Shortage Cost

This cost occurs when there is no inventory

Uses Of Inventory

• Time - The time lags present in the supply chain, from supplier to user at every stage, requires that you maintain certain amounts of inventory to use in this "lead time."

Uses Of Inventory

Uncertainty - Inventories are maintained as buffers to meet uncertainties in demand, supply and movements of goods.

Uses Of Inventory

• Economies of scale - Ideal condition of "one unit at a time at a place where a user needs it, when he needs it" principle tends to incur lots of costs in terms of logistics. So bulk buying, movement and storing brings in economies of scale, thus inventory.

Objectives Of Inventory Control

• To ensure smooth flow of stock

Objectives Of Inventory Control • To provide the required quantity of material

Objectives Of Inventory Control To control Investment in stock

Objectives Of Inventory Control Protection against Fluctuating demand

Objectives Of Inventory Control

Protection against Fluctuation in output

Objectives Of Inventory Control

Minimization Of Risk and Uncertainty

Objectives Of Inventory Control

Risk Of Obsolescence

Objectives Of Inventory Control Minimization Of material Cost