PRESENTATION ON :-

INVENTORY CONTROL
TECHNIQUES

SUBMITTED TO :-
PROF. (DR.) S L GUPTA
DIRECTOR
SUBMITTED BY :-
BIRLA INSTITUTE OF
TECHNOLOGY, MESRA,
KHYATI GUPTA
OFF CAMPUS NOIDA
MBA/45019/21
 Inventory

The term inventory is defined as the itemised list of

goods with their estimated worth specifically annual
account of stock taken in any business.
All the materials, parts, suppliers, expenses and in
process or finished products recorded on the books
by an organization and kept in its stocks, warehouses
or plant for some period of time.
 Definition of inventory control

Inventory control is the technique of maintaining the

size of the inventory at some desired level keeping in
view the best economic interest of an organization.
 OBJECTIVES OF INVENTORY CONTROL

To reduce investment in inventories and made

effective use of capital investments.
Efforts are made to procure goods at minimum price
without bargaining the quality.
To avoid stock out and shortages.
Wastages are avoided.
Inventory management is essential to maintain a
large size inventory for efficient and smooth
production and also for sales operation.
 Benefits of Inventory Control

Ensures an adequate supply of materials

Minimizes inventory costs
Facilitates purchasing economies
Eliminates duplication in ordering
Better utilization of available stocks
Provides a check against the loss of materials
Enables management in cost comparison
 INVENTORY CONTROL TECHNIQUES

ABC Analysis
HML Analysis
VED Analysis.
SDE Analysis
FSN Analysis
SOS Analysis
XYZ Analysis
GOLF Analysis
 ABC Analysis:

One of the widely used techniques.

Objective is to vary the expenses associated with
control, according to potential savings associated
with a proper level of control.
The ABC approach means of categorizing the
inventory items into three classes 'A';'B';'C'
The categorizing is done according to the turnover of
the various products.
 High Medium Low(HML):

The HML classification is same procedure as adopted in

ABC.
The core difference is HML classification unit value is
the
criterion and not the annual consumption value.
The inventories should be place in descending order and
it is up to mgmt to fix limits of these three categories.
Example: the mgmt may decide all units with unit value
of Rs
2,000 and above will be H items.
 Vital Essential Desirable:

They are done to determine the criticality of an item

and its effect on production and other services.
It is specially used for classification of spare parts.
If the part is vital most it is given 'V', if it is essential
then is given as 'E" ‚if it is not so essential it is given
as 'D'.
For 'V' items large stocks are maintained while for 'E'
items minimum stock is enough.
 SDE Classification:

The SDE is based upon the availability of items.

Here 'S' refers to 'Scarce' items
'D' refers to 'Difficult' items
'E' refers to 'Easy to acquire'
This is based on problems faced in procurement,
were some strategies are made on purchasing.
 FSN Analysis:

The abbreviation for FSN in "Fast moving, Slow

moving and Non moving".
Here in this analysis, the date of receipt or the last
date of issue, which ever is later, to determine the
no.of months which have lapsed from last transaction.
FSN is helpful in identifying active items which need
to be reviewed regularly and surplus items and non-
moving items are examined.
 SOS Analysis:

'S' stands for Seasonal items and 'OS'- Off Seasonal items.
In general it is merit to seller to buy seasonal items at
lower price and keep inventory and sell them at high price
during Off seasons.
If not the seller has to buy the goods at higher prices
during Off
seasons.
Decisions are taken based on the fluctuations and
availability.
 XYZ Analysis:

This classification is based on the value of inventory of

materials actually held in stores at given time.
This helps to control the average inventory model value.
'X' items which are 10% of no. of items stored, but
accounting for 70% of the total inventory value.
'Y' items are 20% of no. of items stored and account for
20% of total inventory value.
'Z' items are 70% of no. of items stored and account for
10% of the total value.
This analysis focuses on efforts to reduce the inventory of
these items.
 GOLF Analysis:

This stands for Govt, Open market, Local or Foreign

source of supply.
For certain items, imports are canalized through
govt agencies viz; State trading corporation,
Minerals and Metals Trading Corporation, Indian
drugs and Pharma.
Here no control techniques are not applied.