| . Principles and Practice of Nursing Management and Administration INVENTORY MANAGEMENT SYSTEM * Inventory is ‘anything that is bought and held prior to use. + Inventory means all the materials, parts, suppliers, expenses, and in process ot finished products recorded on registers books by an organization and kept in its stocks for some period of time. IMPORTANCE OF MAINTAINING INVENTORY. + It provides and maintains good customers service + Enables smooth flow of materials through production process + Provides protection against the uncertainty of demand and supply + Ensures a reasonable utilization of equipment and effort + Possbity of discount. if purchased in bulk INVENTORY CONTROL, + Inventory control is the process by which Inventory Is measured and regulated according o predetermined norms such as economic lat se for order, safety stock, minimum level, maximum level, order level ete + Inventory control means stocking adequate number and kind of stores, so that the materials are available whenever required and wherever required. Scientific inventory control results in optimal balance. It is a scientific system which indicates what to order, when to order, how much fo order, how much to stock *+ Inventory control i concerned with minimizing the total cost ‘of inventory. This involves physical control of materials, ‘reservation of material, minimization of obsolescence and damage through timely disposal and efficient handling, maintenance of stores records, proper location, and stocking. ‘Stores also responsible forthe physical verification of stocks ‘and reconciliation them with book figures, the inventory ordering quantities, setting stock level, lead time analysis and reporting + Inventory contol is about product availabilty and balancing the costs of ownership with the costs of procuring, which includes purchasing, receiving and paying (Dave Kaczmarek) * Inventory contol isthe technique of maintaining the se of the inventory at some desired level keeping in view the best ‘economic interest of an organization + Inventory control means keeping a track of inventory, so that the materials are available when needed * Inventory control measures and regulates to predetermine the size for order, safety stock, minimum level of order, and maximum level of order + Inventory contol is concemed with minimising the total cost of inventory INVENTORY SYSTEM A tet of policies and controls that monitors levels of inventory and determines what levels should be maintained, when stocks will be replenished and how large orders should be. 0 @ scanned with Oken Scanner Inventory Management system provides Information licen onage the fw of materials, efectively utlize people anf canoe coordinate intemal ates and comminkate yi, SEidmers Inventory Management does not make decry se operations they provide the Information to manny, Tho wake more eccurate and timely delslons to manage thy operations. OBJECTIVES OF INVENTORY CONTROL + To supply the materials in time 2 Togivernanimum liens’ service by meeting thelr requirement timely, effectively, efficiently, smoothly and satisfactory + To reduce or minimize investment in Inventories + To minimize ile time by avoiding stock out and shortages + To avoid shortage of stock + To minimize the losses due to deterioration, obsolescence, damage of stock ' ‘To meet unforeseen future demand + To average out demand fluctuations + Tobalance various inventory costs such as carying cost, order cost ete IMPORTANCE OF INVENTORY CONTROL ‘+ To provide maximum supply service, consistent with max. mum efficiency & optimum investment ‘Ta provide cushion between forecasted & actual demand fr ee “To have optimum level of inventory: not too large, not smal + To eliminate duplication in ordering + Totake care of fluctuations in demand and lead time + To take care of increasing price tendency of commodities or rebate in bulk buying + To increase transportation efficiently + To minimize the inventory costs + To minimizing waiting time + To provide a check against the loss of material + To beter utllzation of stocks available + To facilitate cost accounting activities + To locate and disposes inactive and obsolete store items ‘Types of Inventory Costs ‘The following are inventory costs: Ordering Cost Iti the cost of ordering the item and securing its supply. Iincudes the expenses for raising the indents, purchase requisition by user department til the execution of order, and receipt and Inspection of item, the salaries and wages of store personnel employed, the rent of store, stationery and other consumables used by the store, etc,fmvoniory Carving (holng) Cont Inventory Control hn ithe cot ncued for kodeg he ene rasuted 05 ee of Unit cent of an tal cost, obsolescence cot, deters tr tne ct on aan te on fod wages of sore personnel empajed, cae tls semen ad thet Consumables ued — hese, ee ut of Stock/Shortago Cost Islss whlch occurs or which may ecu de to non MP tei I Includes break denn on doy ue ‘work, back ordering, loss of good wi On the other Costs Ovher costs include capacity cost, overtime ‘and ile tie; st up cost and ever stocking mags Mas con, HOWTO ACHIEVE CONTROL inventory control can be achieved through 1. Purchasing items at economic pice at a proper tie and in sufficient quantity ” 2, Provision of suitable and secured locaton 3, Inventory identification system 4 Up to date and accurate record beeping with stent pace MAJOR ACTIVITIES OF INVENTORY CONTROL, MASOR AO TRI CEINVENTORY CONTROL Planning Procurement Receiving and inspection Storing and issuing the inventories Recording the receipt and isuing of inventories Physical verification Follow up functions Material standardization and substitution. FACTORS IN INVENTORY CONTROL DECISION. MAKING PROCESS ‘There are three main facorsin inventory conto decision making process: 1, The cost of holding the stock 2. The cost of placing an order 4. The cost of shortage i. what is lost if the stock is insulficent to meet the demand. Setting up of Various Stock Levels Stock levels are not fixed permanently. These are lable to revise ‘according to the changing in the factors determining the levels. ‘These are: Minimum Level Minimum level isthe minimum stock to be maintained forsmooth production Miriam lei Reorder evel - hveroge wage per period * ‘average tne to obtain delivery Maximum Level isthe lee of stock, beyond which the stock isnot maintained Masimum level = Reordering level - Expected minimum consumption in urits during the least time ‘to cbtain delivery + Reorder quantity Reorder Level Nis the tack level at ihich an order should be placed Reorder teveh © Masia reorder peri’ % maximum usage Maximum Weel + Minirosen level z Prverane tock ee = Reserve Stock Excess wage requirement during normal lead time Basic Principles of Inventory Control Satety Stock SS Its the nck for usage at normal rate during the extension of lead time The Safety Stock isthe Gtterence between the Wort Case Scenario and the Average Weebly Usage (ie. Forecast) during the Lead Time period. SS = [WCS -AWU JLT Lead Time (LT) Its the time spent between making the decision of stock replenishment, and actual evadabilty ofthe goods in he store ke should be log, efectve, stainable and dependable. + Loge - it must contain all steps including order (PO ! MO) Processing time, QC check/quarantine. ete + Eflecive - all steps must be as short as posible + Amminable - let's remain reasonable and not too optimistic + Dependable-therelabiir ofalead tme'sthemostimporant [Om characteristic, supplier quality assessment program could become a prerequisite io inventory management. ‘Average Inventory: INVAVG ‘The Average Inventory is the sum of the Safety Stock and half the Re Order Quantiy. INVAVG = SS + 12 xROQ Reorder Point When do we need to re-order? If actual < ROP ‘The Re Order Point (ROP) isthe sum of the Safety Stock and the quantty used during the lead te ROP = SS + (AWU x LT) * ems for which annual consumption i high, orders are placed frequently so that inventory level is as low as posible @ scanned with Oken Scanner