Inventory Management?

Inventory :-Any idle resources that can be pot to some future use

Management :-Any idle resources that can be pot to some future use

I.M. :- The right stock, at the right levels, in the right place, at the right time, and at the right cost
 Reasons for Inventories

1 • Uncertainties in demand

2 • Lead times

3 • Immediacy in availability

4 • Hedge against price changes

5 • Contingencies @strikes, fires, Supply disruptions

6 • Production economy

7 • purchase & transportation economies

 Types Of Inventory

Seasonal Decoupling
Inventory Inventory

Cyclic Pipeline
Inventory Inventory
Benefits Inventory Management?
1 • Increased Sales
2 • Shorter Lead Times
3 • Lower Costs as Inventory Cost Decreases
4 • Lower Investment
5 • Improved Delivery Performance
6 • Increased Employee Efficiency
7 • Increased Customer Loyalty
Inventory Management Questions

How
Much((Q)?

When(ROP)?

Safety Stock
(SS) ?
Inventory Management Techniques

Minimum Minimu
ABC Just In Fast, Slow &
EOQ Safety m Safety
Analysis Time Non-moving
Stock Stock
(FNS)
Method
 Inventory Cost
Cost Of Carrying
• Storage space cost
• Software
• Deflation
• Administration
• Insurance Cost
• Damage,
Cost Waste
Of Ordering
• Cost to prepare a purchase requisition
• Cost to prepare purchase order, invoices
• labor required to inspect goods
• EOQ estimation
Cost Of Shortage
• Rush purchases
• Customer dissatisfaction
• Loss of goodwill
Mathematical Models for Determining
Order Quantity

Economic
Economic
Order Quantity
Production
Quantity Discount
Quantity
(EOQ or Q Model
(EPQ)
System)
Economic Order
Quantity (EOQ)
 Economic Order Quantity (EOQ)
Assumptions
• No Maximum or Minimum Limit Of Order
1 Quantity

2
• Demand is known, constant and independent

3
• Outside Supplier

4
• No Discount

5
• Instantaneous replenishment of items

6
• Continuous Demand throughout the year
 Calculation

Minimize the TC by ordering the EOQ:

2 DS
EOQ 
H
Where
D  Demand / Period
S  OrderingCo st
H  HoldingCos tsv / unit & Period