INVENTOR Y

M A NA G EM ENT

PRESENTED BY
J A S N A M A R I YA A R A M B A N
MEANING: INVENTORY
MANAGEMENT
Inventory management is a step in the supply chain where inventory and
stock quantities are tracked in and out of your warehouse.

The goal of inventory management systems is to know where your

inventory is at any given time and how much of it you have in order to
manage inventory levels correctly.

Some companies may opt to scan in inventory via a barcode scanner to

increase efficiency along pick routes and accuracy.
TECHNIQUES OF INVENTORY
MANAGEMENT
1. What Is Economic Order Quantity (EOQ)?

Economic order quantity (EOQ) is the ideal order quantity a

company should purchase to minimize inventory costs such as
holding costs, shortage costs, and order costs. This production-
scheduling model was developed in 1913 by Ford W. Harris and
has been refined over time.1 The formula assumes that demand,
ordering, and holding costs all remain constant.
2. Minimum order quantity.

Minimum order quantities or MOQs are the minimum order size

that the supplier is willing to accept. This is often expressed as the
minimum number of units. However, suppliers may also set the
minimum order quantity in terms of order value.
3. ABC analysis.

ABC analysis is an inventory management technique that

determines the value of inventory items based on their importance
to the business. ABC ranks items on demand, cost and risk data, and
inventory mangers group items into classes based on those criteria.
4. Just-in-time inventory management.

JIT is a form of inventory management that requires working

closely with suppliers so that raw materials arrive as production is
scheduled to begin, but no sooner. The goal is to have the minimum
amount of inventory on hand to meet demand.
5. Safety stock inventory.

Safety stock inventory management is extra inventory being ordered

beyond expected demand. This technique is used to prevent stock outs
typically caused by incorrect forecasting or unforeseen changes in
customer demand.
6. FIFO Method
FIFO stands for “First-In, First-Out”. It is a method used for cost
flow assumption purposes in the cost of goods sold calculation. The
FIFO method assumes that the oldest products in a company's
inventory have been sold first. The costs paid for those oldest
products are the ones used in the calculation.
7. LIFO Method
Last in, first out (LIFO) is a method used to account for inventory.
Under LIFO, the costs of the most recent products purchased (or
produced) are the first to be expensed. LIFO is used only in the United
States and governed by the generally accepted accounting principles
(GAAP).