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INVENTORY MANAGEMENT

Presented by
Amit Jaglan
Manish Vats
Neeraj Bala
Sakshi Vats
Overvie
w
ØInventory & Inventory management
ØPurpose of inventory
ØOpposing views of inventories
ØNature of Inventories
ØInventory Systems
ØInventory Classifications Models
ØConclusion
Invento
ry commodities, or other economic resources
stock of goods,
held by a firm at a particular time
for their future production requirements and
for their future demands.

Inventory
Management
assists organizations
in minimizing their inventory cost
without compromising on their ability to respond quickly to customer
demand.
INVENTORY MANAGEMANT AND SUPPLY
CHAIN MANAGEMENT

Inventory management is concerned with the planning,


implementation and control of the movement of physical objects and
associated information in general.

supply chain management focuses on the ultimate customer,


who creates the demand, which in turn supports the existence of the
supply chain to provide the customer with the product.
TYPES OF
INVENTORY
 Raw material
 Semi finished goods
 Finished goods
Purpose of
inventory
 Smooth production
 Better service to customers
 Protection against Business uncertainties
 Quantity discounts advantage
Opposing Views of
Inventory
• Why We Want to Hold Inventories
• Why We Not Want to Hold Inventories
Why We Want to Hold
Inventories
 Improve customer service
 Reduce certain costs
 Contribute to the efficient and effective
operation of the production system
Visibility &
Intelligence
Why We Do Not Want to
Hold Inventories
 Certain costs increase such as
carrying costs
cost of diluted return on investment
capacity costs
large-lot quality cost
cost of production problems
Nature of
Inventory
 Two Fundamental Inventory Decisions
 Independent Demand Inventory Systems
 Dependent Demand Inventory Systems
 Inventory Costs
Two Fundamental Inventory
Decisions
 How much to order of each material
when orders are placed with either
outside suppliers or production
departments within organizations
 When to place the orders
Independent Demand
Inventory Systems
 Demand for an item carried in inventory
is independent of the demand for any
other item in inventory
 Finished goods inventory is an example
 Demands are estimated from forecasts
and/or customer orders
Dependent Demand Inventory
Systems
 Items whose demand depends on the
demands for other items
 For example, the demand for raw
materials and components can be
calculated from the demand for finished
goods
 The systems used to manage these
inventories are different from those used
to manage independent demand items
Independent Vs. Dependant
Demand
Independent
Demand
A Dependent Demand
(components)

B(4) C(2)

D(2) E(1) D(3) F(2)


Inventory
Costs
 Purchase Cost
 Carrying Cost
 Ordering Cost
 Stock-out Cost
Inventory
Systems
 Single period Inventory System
 Multi- period Inventory System
• Fixed order quantity system(Q-system)
• Fixed order period system(p-system)
IDLE STATE
IDLE STATE Waiting for demand
Waiting for demand DEMAND OCCURS
Units withdrawn
DEMAND OCCURS from inventory
Units withdrawn
from inventory or
Has
back ordered
no review
time
arrived
yes
COMPUTIVE INVENTORY
POSITION
COMPUTIVE INVENTORY
Position=on hand +on
order-back order POSITION
Position=on hand +on
order-back order

Is position
p reorder
point
Compute order quantity to
no
yes bring inventory upto
required level
Issue an order
for exactly Q
units Issue an order for
number of units
needed
Balancing Carrying against Ordering Cost

Annual Cost ($)


Minimum
Higher

Total Annual
Stocking Costs

Total Annual
Stocking Costs
Annual
Carrying
Lower

Annual
Ordering Costs
Order Quantity
Smaller EOQ Larger
Inventory classification
model
 ABC classification
 VED Classification
 FSND Classification
Thank
Thank
You
You