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INVENTORY CONTROL TECHNIQUES

1. 2. 3. 4. 5. 6. 7. 8. ABC Analysis HML Analysis VED Analysis SED classification FSN classification SOS analysis XYZ analysis EOQ

ABC Analysis Depends upon pro. Vilfredo pareto¶s principle .

Inventory items 1 2 3 4 5 6 7 Annual uses % of total inventory usage 18000 15000 17000 8000 6000 9000 7000 18% 15% 17% 8% 6% 9% 7% Items A A A B B B B .

8% 2% 3% 1.00000 2.2% 3% 2.5% 3% 2.8 9 10 11 12 13 14 15 Total 2500 3000 2200 3000 2800 2000 3000 1500 1.5% 100% C C C C C C C C .

HML classification ‡ High. .Medium-Low ‡ Difference between ABC and HML is unit value is the criterion and not the annual consumption value ‡ The item of inventory should be listed in descending order of unit value and it is up to the management to fix limits for three categories.

For µV¶ item. a large stock of inventory is generally maintained. while for µD¶ item minimum stock is enough.VED classification ‡ Vital-Essential-Desirable ‡ The VED analysis is done to determine the criticality of an item and its effect on production and other services ‡ It is specially used for classification of spare ‡ . .

and those which are in short supply ‡ D refers to difficult item which are available indigenously but are difficult item to produce ‡ E refers to item which are easy to acquire and which are available in the local market .SDE classification ‡ The SDE analysis is based upon the availability of item and is very useful in the context of supply ‡ . generally imported. S refer to scare item.

FSN Analysis ‡ FNS stand for fast moving. The items are usually grouped into period of 12 months. slow moving and non-moving ‡ To carry out FNS analysis the date of receipt or the date of issue. is taken to determine the number of month which have lapsed since the last transaction. whichever is later. .

SOS Analysis ‡ S stand for seasonal item and OS stand for off-seasonal items ‡ It may be advantageous to buy seasonal item in low prices and keep inventory or buy at high price during off seasons. .

XYZ analysis help to control average inventory value by focussing efforts to reduce the inventory of X items which are usually 10% of the number of item stored. . ‡ The remained 70% of the item accounting for 10% of the total inventory value are z. but accounting for 70% of total inventory value ‡ . y items are 20% of the number of item stored and accounting for 20% total inventory value. ‡ .XYZ Analysis ‡ This classification is based on the value of the inventory of actual held in stores at a given time.

an order for supplies is placed when the existing stock reaches reordered point ‡ The formula of EOQ is .Economic order quantity ‡ Under the fixed order quantity system of inventory management.