Inventory Management

Submitted By:- Ravjot Kaur

Sharanjeet Sidhu
Submitted To:- Mrs.Roopali Batra
Mam
 What Is Inventory Management?

The process of Ordering, Storing,

Consuming and selling Company's
Inventory.

It Helps to identify:
 What to order,
 When to order,
 How much to order,
And where to store the order.
 • Tools And Techniques Of Inventory
Management
ABC Method

• ABC: Always Better Control

• Or Propotional Part Value Method

• Concentrates on important items and thus also

reffered to as Control by Importance and
Exception.

• Material are classified into three Categories:

A, B & C
ABC Method

• Group A : Constitutes costly items which are

10 to 20%of the total items and may account
for about 50% of the total value of stores

• Group B : Constitutes 20 to 30% of the stores

items and represent 30% of the total value of
Stores

• Group C : Constitute to 70 to 80% of the items

are covered costing about 20% of the total
Value
 Economic Order Quantity (EOQ)

• Economic order quantity is the size of an order

that businesses and organisations use to
understand how much inventory is necessary
to stock in stores.

• The EOQ is that inventory level which

minimise the total of ordering and carrying
costs.

• The quantity to be purchased should neither

be small nor big.
 Determinants of EOQ
• Ordering Cost
it is the cost of ordering or purchasing and
receiving the inventory.
Example:- Salary of purchase department,
Transportation costs.
• Carrying Cost
Carrying cost is the cost a business incurs for
"carrying" or storing inventory.
Example:- Warehouse cost,
Employees salaries
• Annual Demand
The annual demand is the number of units that
you sell annually.
 • Assumptions of EOQ

• The ordering cost is constant.

• The lead time is fixed.
• There is no quantity discount.
• The rate of demand is constant.
• The replenishment is made
instantaneously; the whole batch is
delivered at once.
 Graphic Approach

• EOQ occur at the point mentioned in the graph,

where the total cost is minimum.
• EOQ is the order quantity that minimizes total
inventory holding costs and ordering costs.
EOQ Formula

• D = Raw Material
Demand
• Co = Cost of order
Per unit
• Cc = Cost of
Carrying
 Levels of Inventory

The Amount of inventory you have available

throughtout your entire distribution network.
 MINIMUM LEVEL :- If the stock are less than the
minimum level, the work will stop due to shortage of
material.
 RE-ORDER LEVEL :- The level when the business
concern makes fresh order at this level.
 MAXIMUM LEVEL :- If the quantity exceeds maximum
level limit then it will be overstocking.
 DANGER LEVEL :- It is the level below the minimum
level. It leads to stoppage of the production process.
 Formulas
• Minimum Level = Re-order Level -
(Average Usage × Average Lead Time)

• Re-Ordering Level = Maximum Rate of

Consumption × Maximum reorder period

• Maximum Level = (Reorder Level +

Reorder Quantity) - ( Minimum Usage ×
Minimum Reorder Period)
 FSN Analysis

It looks at the quantity, Consumption rate and how

often the item is issued and used.
 Fast Moving
The items which are frequently required and issue
on the continous basis from the store room.
 Slow Moving
Those items which are moderately required and
issued after regular interval from store room.
 Non-Moving
Items which are rarely required.
Thank You