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Inventory Management Project

Inventory Management Project

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Published by Vinaykumar Singh

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Published by: Vinaykumar Singh on Jul 26, 2010
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07/11/2013

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INVENTORY MANAGEMENT1.INTRODUCTIONDEFINATION AND MEANINGInventory
is a list of goodsandmaterials, or those goods and materials themselves, held available in stock by abusiness.Inventory are held in order to manage and hide from thecustomer the fact that manufacture/supply delay is longer thandelivery delay, and also to ease the effect of imperfections inthe manufacturing process that lower production efficiencies if production capacity stands idle for lack of materials.
The reasons for keeping stock
All these stock reasons can apply to any owner or productstage.
Buffer stock
is held in individual workstations against thepossibility that the upstream workstation may be a little delayedin providing the next item for processing. Whilst someprocesses carry very large buffer stocks, Toyota moved to one(or a few items) and has now moved to eliminate this stocktype.
Safety stock
is held against process or machine failure in thehope/belief that the failure can be repaired before the stock
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runs out. This type of stock can be eliminated by programmeslikeTotal Productive Maintenance 
Overproduction
is held because the forecast and the actualsales did not match. Making to order andJITeliminates thisstock type.
Lot delay stock
is held because a part of the process isdesigned to work on a batch basis whilst only processing itemsindividually. Therefore each item of the lot must wait for thewhole lot to be processed before moving to the nextworkstation. This can be eliminated by single piece working or a lot size of one.
Demand fluctuation stock
is held where production capacityis unable to flex with demand. Therefore a stock is built in timesof lower utilisation to be supplied to customers when demandexceeds production capacity. This can be eliminated byincreasing the flexibility and capacity of a production line or reduced by moving to item level load balancing.
Line balance stock
is held because different sub-processes ina line work at different rates. Therefore stock will accumulateafter a fast sub-process or before a large lot size sub-process.Line balancing will eliminate this stock type.
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Changeover stock
is held after a sub-process that has a longsetup or change-over time. This stock is then used while thatchange-over is happening. This stock can be eliminated bytools likeSMED.Where these stocks contain the same or similar items it is oftenthe work practice to hold all these stocks mixed together beforeor after the sub-process to which they relate. This 'reduces'costs. Because they are mixed-up together there is no visualreminder to operators of the adjacent sub-processes or linemanagement of the stock which is due to a particular causeand should be a particular individual's responsibility withinevitable consequences. Some plants have centralized stockholding across sub-processes which makes the situation evenmore acute.
The basis of Inventory accounting
Inventory needs to be accounted where it is held acrossaccounting period boundaries since generally expenses shouldbe matched against the results of that expense within the sameperiod. When processes were simple and short then inventorieswere small but with more complex processes then inventoriesbecame larger and significant valued items on the balancesheet. This need to value unsold and incomplete goods hasdriven many new behaviours into management practise.Perhaps most significant of these are the complexities of fixed
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