a.

Theory of Constraints

The Theory of Constraints

The theory of constraints defines that the process of removing the bottleneck from the processes. The
weaker section of the process should be identified and through systematic method it was eradicated. Like
the weaker link of the Chain makes bottleneck in overall chain function, this link could be replaced or
either repair to improve the efficiency of the chain process.

b. Stock Take Policies (Annual and Cycle)

Stock take Policies is the physical checking of the equipment and condition of the item that was held in
the inventory for a year. Stock taking policies are usually companies makes for the purpose of audit and
fiscal period. It can be done on the yearly wise or may be done in quarter or semi- year cycle time that
depends up on each company policy.

c. Periodic Inventory System vs Perpetual Inventory System (ERP)

The Periodic Inventory System used to calculate the inventory in the end of the accounting period. And
the perpetual inventory system used to record the inventory on continual basis. The perpetual system is
more maintaining the record keeping as it has regular maintained the record balances. While, the periodic
system is the one-time physical inventory record to check the ending inventory and cost of goods sold.

d. Stock-Out Management vs Dead Stock Management vs Age Management

The stock out occurs when the customer order is not fulfilled, because of shortage in stock. So, the
management of the stock level in order to avoid the frequent stock-out is called Stock- out Management.
This situation occurs, when the demand is unexpected high and safety stock is not sufficient to complete
the order placed

The Dead Stock management is the management of certain portion of stock that get expired or have not
been sold or stored for extended period. Sometime, it occurs because of miscommunication between the
warehouse and distributor upon the amount of goods demanded by consumer.

Age Management is the management of inventory lifespan. How long the life of an inventory and how to
manage it? These questions are identified in the process of age management of stock.

e. ABC Classification/Prioritization

The ABC analysis is the classification of the products based on their preference. In a company, there are
multiple product range and some products need special focus due its high market share or sales. While,
some products required less attention. This classification of based on Pareto Analysis which demonstrate
that small number of items represents the larger percentage of value are called as “A” inventory items and
moderate number of items classified as “B” items contain the 30 to 35 percent in total and similarly, up to
50 percent of items contribute the 10percent of total inventory value as called “C” inventory items that are
least preference items as shown in the figure. The ABC analysis help the company to invest the best use
of their resources on the right product range and to get the high profit.
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f. Johnson rule and method

Johnson rule and method define the sequence of work done on the workstation in the operations. This
method helps in eliminating the amount of idle time during the two or more workstation working.

g. Age Reserve Planning

Age Reserve Planning

h. Safety Stock Vs Buffer Stock Vs Dead Stock

Safety stock is the excess number of quantity held by a company in the warehouse to avoid the risk of out
of stock. Companies are keeping stock in order to fulfill the unexpected demand that may arise in the
future and make their product readily available to customer.

Buffer Stock is the keeping of inventory till the replenishment of current stock which is in transit or make to
order.

Dead Stock is defining as the stock that are not sold and which are present in the warehouse for long
period of time. These stock are defective and can be sold in the salvage value.

i. Inventory carrying cost:

Inventory carrying cost is the sum of all the cost that incurred on keeping the stock in warehouse. The
cost contain warehouse are the salaries, rent, holding, taxes, insurance, depreciation and maintenance
etc.

j. Drop shipping

Drop shipping is the method in which retailor transfer the order detail to the manufacture or distributor and
who parcel the item direct to the consumer. The retailor consider the middle man between the
manufacture/ wholesaler and consumer. and retailor does not keep inventory in stock.

k. Through put vs Lead Time

Through put is the material passing rate through the machine. Each items in the production are process
through the workstation and it represent the rate of units produced in the given through put time.

Lead Time is the time gap of when the order is received till the time of the order is delivered to the
customer. The lead time can be consumed in the operations, processing, warehousing etc.
l. Inventory Cycle Vs Cycle Counting

The Inventory cycle is the measure of large amount of goods and services that performed a physical
inventory once a year. While, the cycle counting is the process of calculating the small amount of
inventory on a frequent basis of calculation.

m. Just in Time vs Just in Sequence

Just in time is the management technique that align the raw material orders from the supplier directly to
the manufacture. Such as, the Toyota manufacturing company order the car equipment when they
receive new order. While, just in Sequence is the sequence arrangement of the parts in the assembly and
in order to deliver the right parts to the right assemble line.