Inventory management

It refers to a set of policies and procedures by which an organization determines which materials it will hold in stock and the quantity of each that it will carry.

CLASSIFICATION OF INVENTORIES:
Production Inventories- They are two types Those purchased from the market like raw materials, spare parts and components. Special parts of components manufactured in ones own company and kept in stock for use.

Classification of Inventory
Raw material Finished goods Work in progress or in-process inventories Consumer stores and spares

NEED FOR INVENTORY MANAGEMENT

The increasing of manufacturing units. Todays trend is large scale therefore there is a need to manage the large stock. 2. The wide variety and complexity of the requirements of modern industries also necessitates conscious inventory management. 3. The urgency of modern requirements and then high idle time cost of machines and men. 4. Greater need to maintain liquidity in the trading economy.

IMPORTANCE OF INVENTORY MANAGEMENT It minimizes the carrying cost and time. It minimizes the large investment on inventories because it will lock up the large amount of capital. It controls both over stock and under stocking of inventories.

FUNCTIONS OF INVENTORY
The lot size inventory Fluctuation inventory Anticipation inventory Transportation inventory

COST OF INVENTORY
Inventory carrying costs Purchasing or acquisitions cost -Rentals of space occupied by the stores and taxes payable. -Insurance on the goods. -Obsolescence -Shrinkage -Evaporation -Deterioration of spoilage -Pay roll costs -Overheads like electricity, water, maintenance costs Stock out costs

BENEFITS OF HOLDING INVENTORIES

Avoiding losses of sales Gaining quality discounts Reducing order cost Achieving efficient production

TOOLS AND TECHNIQUES OF INVENTORY MANAGEMENT ABC analysis Economic order quantity Recorder points Two bin system or bin card system Fixation of stock level.