*Inventory Control

*What is Inventory?
* Inventory is the process of ordering, storing and
utilization of the raw materials needed during
manufacturing and the process of monitoring and
controlling the final product that is ready for sale.
* Since there is a significant investment in the
inventory itself as well as in storage, tracking and
insurance of it, mismanaged inventories can cause
substantial financial concerns and problems for the
business. The ideal inventory management system
should create a plan that ensures that there is
neither an inventory surplus not a shortage.
tance of Inventory:

*Providing Supply and Demand

Balance

*Providing Safety Stock

*Providing Geographical
Specialization
rious Forms of Inventories:

*Raw Materials

*Work-in-Progress

*Finished Goods
 * The Forms of inventories existing in a
manufacturing enterprise can be
classified into three categories:

(i) Raw Materials:

These are those goods which have been purchased and stored for future productions.
These are the goods which have not yet been committed to production at all.

(ii) Work-in-Progress:
These are the goods which have been committed to production but the finished goods
have not yet been produced. In other words, work-in-progress inventories refer to semi-
manufactured products.

(iii) Finished Goods:

These are the goods after production process is complete. Say, these are the final
products of the production process ready for sale. In case of wholesaler or retailer,
inventories are generally referred to as merchandise inventories. Some firms also
maintain the fourth type of inventories called supplies. Examples of supplies are office
and plant cleaning materials, oil, fuel, light bulbs and etc.
*Inventory Models:
* Economic Ordering Quantity (EOQ) Model

* ABC Analysis

* Inventory Turnover Ratio.

1. Economic Ordering Quantity (EOQ) Model:
(i) How frequently to buy?
(ii) When to buy?
(iii) What should be the reserve stock?

2.Determination of EOQ:
(i) Ordering Costs, and
(ii) Carrying Costs.
*Benefits of Inventory:
Hedge against uncertain demand
Hedge against uncertain supply
Economize on ordering costs
Smoothing
To summarize, we build and keep inventory in
order to match supply and demand in the most
cost effective way.
* Modeling Inventory in a
Supply Chain

Supplier
Retail
Warehouse