Inventory Management

K.U.B.S
Introduction
What Is Supply Chain?
A Supply Chain is a Channel through which a demand for a product
is satisfied by means of supply of products through various entities
present. The Entities in a Supply Chain are Suppliers, Manufacturer,
Middlemen (Wholesaler and Retailer) and finally the Customer.
So the demand of the Customer is satisfied by supply of value added
goods that travel through the Supply Chain entities.

Why Supply Chain Management?

“Supply Chain Management is rapidly becoming the most important
aspect of business success. Those who manage their supply chain
effectively will flourish and prosper, those who don't may not be
around in a few years.”
Evaluation of Supply Chain

1880 to 1900 - Industrial Revolution, job Shops.

1900 to 1920 - Assembly Lines, EOQ Model

1920 to 1940 - Assembly Lines, EOQ Model

1940 to 1960 - Logistics Systems, Lean Manufacturing

1960 to 1980 - Main Frame Computer

1980 to 2000 - PC and Client Server, Internet

 2000 to Present - Cloud Computing

Objective Of Supply Chain

To maximize the overall value generated.

The value a supply chain generates:

Difference between the final worth of product to the
customer and the costs the supply chain incurs in
filling the customer’s request.
Basic Supply Chain

Information Flow
 Supply Chain

Supplier Manufacturer Distributor Retailer Customers

 Supply Chain Management

Supply Chain Management is

the design and management of processes across
organizational boundaries with the goal of matching
supply and demand in the most cost effective way.

Supply Demand

Mission impossible: Matching Supply and Demand

 Why So Difficult to Match Supply and
Demand?
 Uncertainty in demand and/or supply.
 Changing customer requirements.
 Decreasing product life cycles.
 Conflicting objectives in the supply chain.
 Conflicting objectives even within a single firm;
 Marketing/Sales wants: more FGI inventory, fast delivery, many
package types, special wishes/promotions.

 Production wants: bigger batch size, depots at factory, latest ship date,
decrease changeovers, stable production plan.

 Distribution wants: full truckload, low depot costs, low distribution

costs, small # of SKUs, stable distribution plan.
Drivers of Supply Chain Performance

Production Inventory

Information

Transportation Location
Materials Management in Supply Chain:

Materials Management includes all the basics of supply chain

management, manufacturing planning and control systems,
purchasing, and physical distribution.

Often, the emphasis in business logistics is on transportation and

distribution systems with little concern for what occurs in the
factory.
Material Management
What is Material Management?
Material management is an approach for planning, organizing,
and controlling all those activities principally concerned with
the flow of materials into an organization.

“Material Management is a business function for planning,

purchasing, moving, storing material in a optimum way
which help organization to minimize the various costs like
inventory, purchasing, material handling and distribution
costs”.
Fundamentals Objectives Of MM
The fundamental objectives of the Materials
Management function, often called the famous 5 R of
Materials Management,

  Right Quality

  Right Quantity

  Right Time

  Right Source

  Right Price
 Key Objectives Of MM
•To buy at the lowest price , consistent with desired quality and
service.

•To maintain a high inventory turnover , by reducing excess storage.

•To maintain continuity of supply .

•To develop reliable alternate sources of supply to promote a

competitive atmosphere in performance and pricing.

•To develop and maintain good supplier relationships.

•To participate in Make or Buy decisions.

•To maintain good records and controls.

Scope of Materials Management
The scope of Materials Management varies greatly from
company to company and may include;

Material Planning and Control



Purchasing
 Function

Stores Management Function



Inventory Management


Forecasting


And
 Other Related Activities
Introduction to Inventory

What is inventory?
Inventory is an asset that is owned by a business that has the
express purpose of being sold to a customer. 

Financially, inventory usually represent 20% to 60% of

total assets to manufacturing companies.
The Role of Inventory in Supply Chain
Management

 Support a firm’s competitive strategy

 Maximize the product demand

 Minimize the cost

 To match the supply and demand situation. Examples

are;
 A steel manufacturer intentionally keeps mismatch.
 In a retail store, inventory is intentionally kept for meeting the
future demand.
Why Inventory Is an Important Metric In
Supply Chain Management ?
Inventory is held throughout the supply chain in the form
of raw material, work in process and finished goods.
Major source of cost in supply chain.

It has huge impact on responsiveness.

Economies of scale

Inventory has a significant impact on the material flow

time.
 Material Flow Time: Time elapses between the point at which material
enters in the supply chain to the point at which exits.
Inventory Strategies/Models
1. Push Inventory Model :
• Depends on forecasting.
• Most significant Problem is unpredictability of customer
demand.

2. Pull Inventory Model:

 Also called Just –in– time or JIT.
 Effective when every link in the company’s supply chain
operate according to this model.

 Some businesses use a hybrid push-pull method.