Inventory Management

Importance
- To avoid customer dissatisfaction - To avoid damage to the reputation of the company - To avoid loss of sales - Losing an opportunity of profit making - To avoid inventory carrying cost - To avoid problem of obsolescence

Two important decisions

- How much to order

- When to order

Inventory Turnover Ratio

Industry turnover ratio is a relationship between cost of goods sold during a particular period of time and cost of average inventory during that perticulat period Therefore, Inventory turnover ratio = Cost of good sold / Average inventory at cost Or = Net Sales / Inventory

Popular policies to review inventory

- Continuous Review - Periodic Review

Types of Inventories
Cycle Inventory Safety Stock Decoupling Stock Anticipation Inventory ( Seasonal and Speculation Stock) - Pipeline Inventory - Dead Stock

Inventory related Cost

- Ordering Cost ( Administration, Transportation, Receiving Cost) - Carrying Cost ( Financing, Space, Inventory risks) - Stock out Cost ( Lost Sales Cost, Back order Cost )

Managing Cycle Stock

Wilson- Haris Square root Model

Multiple item, Multiple Location Inventory Management

Selective Inventory Control Techniques - ABC Analysis - FSN Classification - VED Classification

Thanks