INVENTORY CONTROL TECHNIQUES

1. 2. 3. 4. 5. 6. 7. 8. ABC Analysis HML Analysis VED Analysis SED classification FSN classification SOS analysis XYZ analysis EOQ

ABC Analysis
Depends upon pro. Vilfredo paretos principle

Inventory items 1 2 3 4 5 6 7

Annual uses % of total inventory usage 18000 15000 17000 8000 6000 9000 7000 18% 15% 17% 8% 6% 9% 7%

Items

A A A B B B B

8 9 10 11 12 13 14 15 Total

2500 3000 2200 3000 2800 2000 3000 1500 1,00000

2.5% 3% 2.2% 3% 2.8% 2% 3% 1.5% 100%

C C C C C C C C

HML classification
High- Medium-Low Difference between ABC and HML is unit value is the criterion and not the annual consumption value The item of inventory should be listed in descending order of unit value and it is up to the management to fix limits for three categories.

VED classification
Vital-Essential-Desirable The VED analysis is done to determine the criticality of an item and its effect on production and other services It is specially used for classification of spare . For V item, a large stock of inventory is generally maintained, while for D item minimum stock is enough.

SDE classification
The SDE analysis is based upon the

availability of item and is very useful in the context of supply , S refer to scare item, generally imported, and those which are in short supply D refers to difficult item which are available indigenously but are difficult item to produce E refers to item which are easy to acquire and which are available in the local market

FSN Analysis
FNS stand for fast moving, slow moving and non-moving To carry out FNS analysis the date of receipt or the date of issue, whichever is later, is taken to determine the number of month which have lapsed since the last transaction. The items are usually grouped into period of 12 months.

SOS Analysis
S stand for seasonal item and OS stand for off-seasonal items It may be advantageous to buy seasonal item in low prices and keep inventory or buy at high price during off seasons.

XYZ Analysis
This classification is based on the value of the inventory of actual held in stores at a given time. . XYZ analysis help to control average inventory value by focussing efforts to reduce the inventory of X items which are usually 10% of the number of item stored, but accounting for 70% of total inventory value , y items are 20% of the number of item stored and accounting for 20% total inventory value. The remained 70% of the item accounting for 10% of the total inventory value are z.

Economic order quantity

Under the fixed order quantity system of inventory management, an order for supplies is placed when the existing stock reaches reordered point The formula of EOQ is