INVENTRY MANAGEMENT

The dictionary meaning of inventory is stock of

goods. The word inventory is understood differently by various authors. In accounting language it may mean stock of finished goods only. In manufacturing concern, it may include raw material, work in progress & stores etc.

Element of Inventory
1) Raw Material- It include direct material used in

the manufacture of products. 2) Work-in-Progress- It includes partly finished goods & material held between manufacturing stages. It can also be stated that those raw material which used in production process but are not finally converted into final product are WIP.

3) Finished Goods- The goods ready for sale or Distribution come under this class . 4) Stores & Spares- This category include those Product , which are accessories to the main product Produced for the purpose of sale. Ex- Bolts , nuts, Clamps etc.

Inventory Management
Inventory Management is to keep the stock in such a

way that neither there is over-stocking nor understocking .

Objective of Inventory Management

1)Availability of material
2) Minimize the wastage 3) Promotion of Manufacturing Efficiency 4) Better service to customer

5) Economy of Purchasing

6) Minimizing Cost

Techniques of Inventory Management

1) ABC Analysis (Always, Better, Control)

2) HML Analysis (High, Medium, Low)

3) SDE Analysis (Scare, Difficult Easy to obtain)

Short Term
Bank loans necessity of paying interest on the payment, repayment periods from 1 year upwards but generally no longer than 5 or 10 years at most Overdraft facilities the right to be able to withdraw funds you do not currently have
Provides flexibility for a firm Interest only paid on the amount overdrawn Overdraft limit the maximum amount allowed to be drawn - the

firm does not have to use all of this limit Trade credit Careful management of trade credit can help ease cash flow usually between 28 and 90 days to pay Money lenders: people/institutions who lend money for higher rate of ineterst than prevailing market interest rate.