A TRAINING PROJECT REPORT ON

INVENTORY CONTROL

Submitted in partial fulfillment of the requirement For the award of the degree of BACHELOR OF BUSINESS ADMINISTRATION From university of Kota, Kota (Rajasthan) Academic session 2007-2010

PROJECT GUIDE Bunge India pvt. Let. Under Anil Nanvana DISIGNATION, MIMT, KOTA

SUBMITTED BY Prem raj Sharma BBA 1ST YEAR, MIMT,KOTA

Modi Institute of Management & Technology, Kota (Approved By Aicte, New Delhi & Affiliated To University Of Kota, Kota) Modi Education Complex Dadabari, Kota 324009 Tel No. : 91-744-2504169, 2505421, Fax: 91-744-2391072

CHAPTER -1

INTRODUCTION OF BUNGE
The Bundi factory was established in 1997 by Geepee Ceval Proteins & Investment Ltd. and was taken over by Bunge India Pvt. Ltd in 2003 including management control in January 2004. The plant produces Chambal Refined Oils, De-oil Cakes (DOC) and Vanaspati. The main raw material used to manufacture these products is soybeans seeds and to a lesser extent rape and mustard seed. The plant consists of 3 units: (a) Crushing unit; (b) Refinery facility and (c) Tin container manufacturing unit. The plant also has an in house packaging facility. Crushing unit with a nominal capacity of 950 MT per day carries out the solvent extraction process which generates DOC meal and crude oil. Refinery facility refines crude oil (produced in house or procured) to obtain refined oil through a 4 stage de-gumming, neutralizing, bleaching and deodorizing process. The refinery facility has a nominal capacity of 150 MT per day. The tin container manufacturing unit which was earlier owned by the Bundi Packaging Ltd was taken over by Bunge in 2004. The tin container manufacturing unit has a capacity of producing 10,000 containers per day. The total output of these units for the period April to December 2007 was: Units Crushing Product De-oil Cake (Soya and Rape seed) Crude Oil (Soya and Rape Seed) Refinery Tin Refined Oil (Soya, Groundnut & vanaspati) Tin Containers Quantity 98,073 MT 23,219 MT

Mustard, 25,815 MT 1,052,157 Nos.

The plant is supported by a Technical Director based out of Bunge Singapore who provides support and advice on technical issues to better operational and manufacturing efficiencies. The quality department headed by the Quality Manager reporting into GM plant is responsible for the overall quality control procedures at the plant. Quality control is performed in three stages from input of raw material to output of final product (a) Receipt of input material (b) In-process materials at preparatory, extraction and refinery sections (c) Meal Cooling and Filling Section. It is understood that the Plant Management is conscious about maintaining and improving safety standards in the organization and has appointed a safety manager in January 2007. The plant has developed an On Site Emergency Plan and a safety manual. The maintenance of stock of chemicals, engineering spares and fuel is the responsibility of the Assistant Manager-Store . Maintenance of stock levels of packaging material is the responsibility of the Manager Stores- Purchases. As on December 2007, the stocks of these items were as follows: Items Packing Material Chemicals 88,230K Engineering Spares 569K Fuel 102,190K Total The unit also generates certain by-products and scrap during the production. The sale of by- products is the responsibility of the Manager Commercial and the sale of scrap is overseen by the Manager - Stores Purchase. For the period April December 2007, the sale value of by products was USD 466 K (Rs. 18,403K) and sale value of scrap was USD 28 K (Rs. 1115K). It is to be noted that he plant operates in a zero effuelent discharge zone. The plant was inspected by the officials of the State Pollution Control Board in February 2007 and was found to be in non compliance with the directions under the provisions of the Section 31 A of the Air (Prevention & Control of Pollution) 2,621K 15K 2,262K Value (Rs 000) 11 11,614K 1,777K Value (USD 000) 298K 46K

Act, 1981 and Section 33A of the Water Prevention & Control of Pollution Act, 1974. The plant was served a show cause notice by the State Pollution Control Board on March 6, 2007. As a result of which, the plant had to suspend its manufacturing activity from March 16th 2007 to April 16th 2007. The plant reopened on April 17th 2007 after submitting a proposal for compliance with the directions of the Pollution Control Board and furnishing a guarantee of USD 80 K. In light of this, the plant installed water recycling plant and bag filters in November 2007 at a total cost of USD 761 K. During the period of April to August 2007, un-reconciled differences existed between physical stock and Mfg pro stock balances for packaging material, tin plates, GI wire handles and GI cover scrap. In August 2007, the management conducted a physical verification exercise to reconcile these differences and based on this exercise, inventory of USD 270K was written off after approval from the VP and GM Plant.

PROCESS BLOCK DIAGRAM OF SOLVENT EXTRACTION PLANT A. PREPARATORY SECTION

SILO FLACKING

DAYBIN EXPANDER

CRACKING H.A.D.C.

COOKING S.E. PLANT

B. SOLVENT EXTRACTION PLANT

S.E.P. EXTRACTION PREPARATORY SECTION EXTRATION FEED SCREW EXTRACTOR EXTRACTOR DIST. SCREW SOLVENT TIGHT CONVEYOR CONDENSORS D.T. STRIPPER-DRIER D.O.C. CRUDE OIL MEAL COOLER LUMS BREAKER SCRENNER WATER SOLVENT SEPARATOR HEATER DISTILLATION SECTION MISCELLA TANK HEXANE FROM STORAGE TANK (TO EXTRACT HEXANE WORK TANK OIL)

ECONOMISER-I

BAGGING SECTION (GODOWN) PROCESS BLOCK DIAGRAM OF REFINERY

FROM OIL GODOWN

CRUDE OIL

PHOSHORIC ACIDE
(TO REMOVE GUMS)

DEGUMMING NAOH
(TO REMOVE FFA)

GUMS

BY PRODUCT FOR RECOVER OIL

NEUTRALISATION

SOAP STOCK

BLEACHING EARTH
(TO REMOVE COLOUR)

BLEACHING

SPENT EARTH
(BY-PRODUCT)

DEODORISTION DEO-DISITILLATE CITRIC ACIDE

(TO INCREASES SELF LIFE) (BY-PRODUCT)

STORAGE

FILLING/PACKING

WARE HOUSE PROCESS BLOCK DIGARAM OF VANASPTI FROM PLANT

CRUDE OIL PHOSPHORIC ACIDE

(TO REMOVE GUMS)

DEGUMMING NAOH
(TO REMOVE FFA)

GUMS

BY PRODUCT FOR RECOVER OIL

NEUTRALISATION BLEACHING EARTH

(TO REMVE COLOUR)

SOAP STOCK

BLEACHING

SPENTH EARTH
(BY-PRODUCT)

NICKEL &H2GAS
(HARDING OF OIL)

HYDROGENASATION BLEACHING EARTH

(TO REMVE COLOUR)

POST BLEACHING CITRIC ACID

(TO INCREASES SELF LIFE)

DEODORISATION DEO-DISTILLATE
(BY-PRODUCT)

STORAGE FILLING/PACKING CHILLING

WARE HOUSE

CHAPTER -2

PROJECT ON INVENTORY CONTROL ABC CLASSIFICATION:

Definition: The ABC classification system is to grouping items according to annual issue value, (in terms of money), in an attempt to identify the small number of items that will account for most of the issue value and that are the most important ones to control for effective inventory management. The emphasis is on putting effort where it will have the most effect.

Scope
This procedure covers defining an ABC analysis including determining the relative value of items in the database, ranking items according to multiple criteria, and grouping items into classes that represent the relative value of the items. System References ABC Analysis - Creating a Compile ABC Analysis - Generating ABC Descending Value Report ABC Analysis - Defining Classes ABC Analysis - Defining Assignment Groups ABC Analysis - Associating Classes and Assignment Groups ABC Analysis - Assigning Items to Classes ABC Analysis - Updating Item Assignments ABC Analysis - Generating the ABC Assignment Report Policy ABC analysis is performed if an inventory organization uses Cycle Counting to take inventory and is used to determine the frequency with which each item is counted.

ABC Compile must be purged and run again in order to included newly added items in the cycle count. This process must be done periodically as determined by the INV Administrator. Responsibility The INV Administrator is responsible for determining the relative value of items and ranking them using the ABC analysis. Distribution Director of Procurement Services INV Administrator * Ownership The Director of Procurement Services is responsible for ensuring that this document is necessary, reflects actual practice, and supports University policy. Activity Preface This activity is performed whenever a new inventory is created which will use Cycle Counting and when a new item is added to an existing inventory that uses Cycle Counting. INV Administrator 1. Determine whether you wish to create new ABC analysis or edit an existing one. You can add new items or edit items in an existing ABC analysis. If you wish to edit an existing ABC Analysis, go to task #8. Otherwise, go to task #2. 2. Create the ABC compile. The ABC compile ranks all the items in your inventory based upon criteria you select. This ranking is used to assign classes to your items. Inventory N ABC Codes ABC Compiles B New Define ABC Compile Refer to ABC Analysis - Creating a Compile. 3. Generate the ABC Descending Value report. This step may have been performed as part of step 2, however you may run the report at a later time. Inventory N Reports ABC and Counting S Single Request

B OK ABC and Counting Reports Refer to ABC Analysis - Generating ABC Descending Value Report. 4. Define class names. Use your own terminology to determine what are commonly used as ABC classes. Define class names that suit your business environment. Inventory N ABC Codes ABC Classes ABC Classes Refer to ABC Analysis - Defining Classes. 5. Define an ABC assignment group. Create a group name. Assign the compile to the group. Inventory N ABC Codes ABC Assignment Groups ABC Assignment Groups Refer to ABC Analysis - Defining Assignment Groups. 6. Associate classes with the assignment group. Choose classes to use with the assignment group. Assign ranking to the classes within an assignment group. Inventory N ABC Codes ABC Assignment Groups B Group Classes ABC Group Class Assignment Refer to ABC Analysis - Associating Classes and Assignment Groups. 7. Assign items to the classes. Assignment may be made based upon the following criteria: o Sequence number o Items Percent o Inventory Value o Value Percent Inventory N ABC Codes ABC Assignment Groups B Assign Items Assign ABC Items Refer to ABC Analysis - Assigning Items to Classes. If you want to manually change the class of an item or add a new item, goto task #8. Otherwise, go to task #9. 8. Update ABC assignment groups. Inventory N ABC Codes ABC Assignment Groups B Update Items Update ABC Assignments Refer to ABC Analysis - Updating Item Assignments. 9. Execute ABC Assignments Report. The ABC Assignments Report will display all items and the classes of the items.

Inventory N Reports ABC and Counting S Single Request B OK ABC and Counting Reports Refer to ABC Analysis - Generating the ABC Assignment Report. 10. Review report for errors. If there are errors in class assignments, go to task #8. Otherwise, end of activity. Go to Cycle Counting.

The ABC classification process is an analysis of a range of items, such as finished products or customers into three categories: A - Outstandingly important; B - of average importance; C - relatively unimportant as a basis for a control scheme. Each category can and sometimes should be handled in a different way, with more attention being devoted to category A, less to B, and still less to C. Popularly known as the "80/20" rule ABC concept is applied to inventory management as a rule-of-thumb. It says that about 80% of the Rupee value, consumption wise, of an inventory remains in about 20% of the items. This rule , in general , applies well and is frequently used by inventory managers to put their efforts where greatest benefits , in terms of cost reduction as well as maintaining a smooth availability of stock, are attained. The ABC concept is derived from the Pareto's 80/20 rule curve. It is also known as the 80-20 concept. Here, Rupee value of each individual inventory item is calculated on annual consumption basis. Thus, applied in the context of inventory, it's a determination of the relative ratios between the number of items and the currency value of the items purchased on a repetitive basis. 10-20% of the items ('A' class) account for 70-80% of the consumption, the next 15-25% ('B' class) account for 10-20% of the consumption and the balance 65-75% ('C' class) account for 5-10% of the consumption. 'A' class items are closely monitored. High value (A), Low value (C), intermediary value (B) 20% of the items account for 80% of total inventory consumption value (Qty consumed X unit rate) Specific items on which efforts can be concentrated profitably Provides a sound basis on which to allocate funds and time

A, B & C, all have a purchasing / storage policy - A, most critically reviewed, B little less while C still less with greater results. Inventory Control Application: The ABC classification system is to grouping items according to annual issue value, (in terms of money), in an attempt to identify the small number of items that will account for most of the issue value and that are the most important ones to control for effective inventory management. The emphasis is on putting effort where it will have the most effect. All the items of inventories are put in three categories, as below: (A) Item: These Items are seen to be of high Rupee consumption volume. "A" items usually include 10-20% of all inventory items, and account for 50-60% of the total Rupee consumption volume. (B) Items: "B" items are those that are 30-40% of all inventory items, and account for 30-40% of the total Rupee consumption volume of the inventory. These are important, but not critical, and dont pose sourcing difficulties. (C) Items: "C" items account for 40-50% of all inventory items, but only 5-10% of the total Rupee consumption volume. Characteristically, these are standard, lowcost and readily available items. ABC classifications allow the inventory manager to assign priorities for inventory control. Strict control needs to be kept on A and B items, with preferably low safety stock level. Taking a lenient view, the C class items can be maintained with looser control and with high safety stock level. The ABC concept puts emphasis on the fact that every item of inventory is critical and has the potential of affecting adversely production, or sales to a customer or operations. The categorization helps in better control on A and B items. In addition to other management procedures, ABC classifications can be used to design cycle counting schemes. For example, A items may be counted 3 times per year, B items 1 to 2 times, and C items only once, or not at all. How to carry out an ABC analysis of Inventory ABC analysis is a basic supply chain technique, often carried out by inventory controllers/materials managers, and is the starting point in inventory control. A system of categorization, with similarities to Pareto analysis, the method usually categorizes inventory into three bands with each band having a different management control associated. Although different criteria may be applied to each category the typical method of scoring an inventory item is that of annual

consumption value of said item (qty consumed X cost of item) with the result then ranked and then scored (A, B or C). Bandings may be specific to the industry but typically follow a 70%, 90%, 100% banding in that (a). A class items represent 70% of the value, (b).B class items fall between 70% and 90% of the annual value with (c).C classes the remaining. In practical terms the complex high cost materials typically fall into the A class items, with the consumable, low cost (and typically fast moving) classed as C class. Not all stock is equally valuable and therefore doesnt require the same management focus. The results of the ABC analysis provide information that helps evaluate how each inventory part should be monitored and controlled. These controls are typically: A class items which are critically important and require close monitoring and tight control while this may account for large value these will typically comprise a small percentage of the overall inventory count. B classes are of lower criticality requiring standard controls and periodic reviews of usage. C class require the least controls, are sometimes issues as free stock or forward holding. In summary, ABC Analysis is the basis for material management processes and helps define how stock is managed. It can form the basis of various activity including leading plans on alternative stocking arrangements (consignment stock), reorder calculations and can help determine at what intervals inventory checks are carried out (for example A class items may be required to be checked more frequently than c class stores. Process (steps) in Inventory Management The primary and foremost step in inventory management is acquiring accurate information for inbound operations. The information so gained in advance can be a crucial factor in improving the inbound productivity. Setting up of an advanced inbound strategy and execution framework can be done without too much of reengineering effort for the supply chain. The perfect way to commence is to make the best use of information available to you and establish a set of rules and regulations to harness the information efficiently. In order to better your work and progress further you can conduct a survey by asking supply chain executives to name the five most important area for improvement in operations support systems. The Outcome of your survey will reflect better inventory planning as one of the target areas. You must pay special heed to establish an effective way to maintain inventory data integrity or setting up higher productivity and capacity utilization.

Lack of efficient inventory data integrity can lead to large amount of nonproductive labor, underutilized distribution center capacity and diminished customer service levels due to incomplete or late orders. From past few years distributors were looking forward for a device that can help them control and manage their largest asset, inventory. As a result several computer software companies have developed comprehensive inventory management modules and systems. These fresh packages enable the distributor to effectively manage his warehouse stock. Tough the software technique is a beneficial aid yet it cannot provide solutions to inventory management problems. In order for the inventory management system to live up to its potential and perform its best, make sure that you follow quite a few basic and extremely significant ways of good inventory management. To begin with, ensure that your company is protected Against theft. There should be no pilferage problem at your place. While ordering, order only the amount of non-stock or special order items that your customer has approved of. If you wish to add an inventory, you must get a purchase commitment from your customer. Make sure that you assign and use bin sites. Establishment and usage of proper bin sites make order picking a hassle free job in your warehouse. Don't ever forget to make an entry of the material leaving your warehouse. Try to get rid of the no charge/no paperwork material swaps. You should charge the product samples to a salesperson account until they are either returned to stock or charged to the customer. Effective inventory management also requires paper work (picking documents to be filled by the end of the day, entry of every single stock receipt in computer etc.) that is up to the mark, determination of the most beneficial replenishment strategy for each item in each warehouse, setting up some lucrative offers and awards for the buyers, specifying guidelines for setting the reorder method and setting up of an on-going dead stock and excess inventory control program

CHAPTER -3

Report On Inventory control

Definition Of Inventory Management :Inventory management is primarily about specifying the size and placement of stocked goods. Inventory management is required at different locations within a facility or within multiple locations of a supply network to protect the regular and planned course of production against the random disturbance of running out of materials or goods. The scope of inventory management also concerns the fine lines between replenishment lead time, carrying costs of inventory, asset management, inventory forecasting, inventory valuation, inventory visibility, future inventory price forecasting, physical inventory, available physical space for inventory, quality management, replenishment, returns and defective goods and demand forecasting. Other definitions of inventory management from: Involves a retailer seeking to acquire and maintain a proper merchandise assortment while ordering, shipping, handling, and related costs are kept in check. Systems and processes that identify inventory requirements, set targets, provide replenishment techniques and report actual and projected inventory status. Handles all functions related to the tracking and management of material. This would include the monitoring of material moved into and out of stockroom locations and the reconciling of the inventory balances. Also may include ABC analysis, lot tracking, cycle counting support etc. Management of the inventories, with the primary objective of determining.controlling stock levels within the physical distribution function to balance the need for product availability against the need for minimizing stock holding and handling costs. In business management, inventory consists of a list of goods and materials held available in stock. An inventory can also be a self examination, a moral inventory. Thursday, March 29, 2007 Inventory Management Software: The Fredrick Group Offers business management, job order fulfillment and inventory software solutions. Take Control of Your Inventory With... Reduced Lead Times: Automatically maintains on-hand quantities, which decreases the risk of shortages or extended wait time for orders.

Track Flow of Parts & Supplies with Greater Control: Automatically maintained audit trails and on-hand quantities allow for better monitoring of parts and supplies. Monitor Shelf-Life & Expiration Dates: Allows you to control your inventory by monitoring shelf-life and expiration dates for various inventory items. Date Change Control: Allows you to control components of the Bill of Materials by date cut in / cut out. Inventory Cost Control: Allows you to control total inventory cost in either Average Costing or Current Cost methods. Customized Reporting: Choose from more than 25 reports and customize them to meet the needs of your business. Built-In Help Features: Built-in help features at both field and screen level provide immediate assistance. Optional Security Features: You have the option to engage full security features Wednesday, March 28, 2007 Inventory Management Control: Controlling Your Inventory To maintain an in-stock position of wanted items and to dispose of unwanted items, it is necessary to establish adequate controls over inventory on order and inventory in stock. There are several proven methods for inventory control. They are listed below, from simplest to most complex. Visual control enables the manager to examine the inventory visually to determine if additional inventory is required. In very small businesses where this method is used, records may not be needed at all or only for slow moving or expensive items. Tickler control enables the manager to physically count a small portion of the inventory each day so that each segment of the inventory is counted every so many days on a regular basis. Click sheet control enables the manager to record the item as it is used on a sheet of paper. Such information is then used for reorder purposes. Stub control (used by retailers) enables the manager to retain a portion of the price ticket when the item is sold. The manager can then use the stub to record the item that was sold. As a business grows, it may find a need for a more sophisticated and technical form of inventory control. Today, the use of computer systems to control inventory is far more feasible for small business than ever before, both through the widespread existence of computer service organizations and the decreasing cost of small-sized computers. Often the justification for such a computer-based system is enhanced by the fact that company accounting and billing procedures can also be handled on the computer.

Point-of-sale terminals relay information on each item used or sold. The manager receives information printouts at regular intervals for review and action. Off-line point-of-sale terminals relay information directly to the supplier's computer who uses the information to ship additional items automatically to the buyer/inventory manager. The final method for inventory control is done by an outside agency. A manufacturer's representative visits the large retailer on a scheduled basis, takes the stock count and writes the reorder. Unwanted merchandise is removed from stock and returned to the manufacturer through a predetermined, authorized procedure. A principal goal for many of the methods described above is to determine the minimum possible annual cost of ordering and stocking each item. Two major control values are used: the order quantity, that is, the size and Page 4 frequency of orders; and the reorder point, that is, the minimum stock level at which additional quantities are ordered. The Economic Order Quantity (EOQ) formula is one widely used method of computing the minimum annual cost for ordering and stocking each item. The EOQ computation takes into account the cost of placing an order, the annual sales rate, the unit cost, and the cost of carrying inventory. Many books on management practices describe the EOQ model in detail.

Thursday, March Inventory Management Software:Traker Systems Traker Systems

29,

2008

For warehouse owners that charge customers for inventory storage space, Traker can handle all of your billing and shipping needs.Customize your storage charges to suit each customer or product. Provides applications for the transportation and manufacturing industries. Their inventory management system fills billing and shipping needs.

Meaning of inventory:Inventories are unconsumed or unsold goods purchased or manufactured. According to the accounting standard 2(revised), inventories are assets. (a) held for sale in the ordinary course of business, (b) in the process of production for such sale, or (c) in the from of materials or supplies to be consumed in the production process or in the rendering of rendering of services. Thus the term inventory includes stock of (i) finished goods, (ii) work in process, and (iii) raw materials and components. In case of a trading concern, inventory primarily consists of finished goods while in case of a manufacturing concern, inventory consists of raw materials, components, stores, work-in-process, and finished goods.

What is inventory control?

Inventory or stock represent a large portion of the business investment and must be well managed to maximize profits. The most common problems with inventory are that they are: (i) Uncontrolled (ii) Inefficient (iii) Costly (iv) Unreliable Companies usually lean towards keeping inventory levels on the high side to insure stock is available when needed. However, this is a high investment which yields a lower return on the dollar invested. Inventory Solutions can help you improve your inventory control so that you: (a) (b) (c) (d) (e) (f) (g) (h) (i) Maintain a proper variety of required items Increase inventory turnover Reduce and optimize inventory and safety stock levels Obtain lower raw material prices through creative supplier networking Eliminate obsolete items Increase cash flow and working capital Reduce storage cost Reduce insurance cost Reduce taxes

INVENTORY SYSTEMS
Records pertaining to quantity and value of inventory-in-hand can be maintained according to any of the following two systems: (1) Periodic Inventory system. (2) Perpetual inventory system.

Periodic Inventory System:

In case of this system the quantity and value of inventory is found out only at the end of the accounting period after having a physical verification of the units in hand. The system does not provide the information regarding the quantity and value of materials in hand on a continuous basis. The cost of materials used is obtained by adding the total value of goods purchased during the period to the value of inventory in hand in the beginning of the period and subtracting the value of inventory at the end of the period. For example, if the inventory in the beginning was 1,000 units of Rs 10,000, purchases during the period were of 5,000 units of Rs 50,000, and the closing inventory 1,500 units of Rs 15,000, the cost of materials used will be taken as Rs 45,000 (i.e., Rs 10,000+Rs 50,000 Rs 15,000 ). It is, thus, assumed that materials not in stock have been used. No accounting is done for shrinkage, losses, theft, and wastage.

Perpetual Inventory System:

It is also known an Automatic Inventory System. According to the chartered institute of Management Accountants London, it is A system of records maintained by the controlling department, which reflects the physical movement of stocks and their current balance. The definition given by wheldon is more exhaustive and explanatory. According to him, it is Method of recording inventory balances after every receipt and issue to facilitate regular checking and to obviate closing down for stocktaking. In case of this system the stores ledger gives balance of raw materials, work-in-progress, and finished goods on a continuing basis. The basic objective of this system is to make available details about the quantity and value of stock of each item all this times. The system, thus, provides a rigid control over stock of materials, as physical stock can regularly be verified with the stock records kept in the stores and the office.

Material Requirements Planning:

MRP calculates and maintains an optimum manufacturing plan based on master production schedules, sales forecasts, inventory status, open orders and bills of material. If properly implemented, it will reduce cash flow and increase profitability. MRP will provide you with the ability to be pro-active rather than re-active in the management of your inventory levels and material flow. Implementing or improving Material Requirements Planning can provide the following benefits for your company: (a) Reduced Inventory Levels (b) Reduced Component Shortages (c) Improved Shipping Performance (d) Improved Customer Service (e) Improved Productivity (f) Simplified and Accurate Scheduling (g) Reduced Purchasing Cost (h) Improve Production Schedules (i) Reduced Manufacturing Cost (j) Reduced Lead Times (k) Less Scrap and Rework (l) Higher Production Quality (m) Improved Communication (n) Improved Plant Efficiency (o) Reduced Freight Cost (p) Reduction in Excess Inventory (q) Reduced Overtime (r) Improved Supply Schedules (s) Improved Calculation of Material Requirements (t)Improved Competitive Position The consultants at Inventory Solutions can provide an un-biased review of your operations and make suggestions on how you can improve your process. MRP uses the following elements to plan optimal inventory levels, purchases, production schedules and more: (a)Master Production Schedule (MPS) (b)Bill of Materials (BOM) (c)Quantity on Hand (QOH) (d)Part Lead Times (e)Sales Order Quantities / Due Dates (f)Scrap Rate (g)Purchase Order Quantities / Due Dates (h)Lot Sizing policies for All Parts (i)Safety Stock Requirements

MRP will plan production so that the right materials are at the right place at the right time. MRP determines the latest possible time to product goods, buy materials and add manufacturing value. Proper Material Requirements Planning can keep cash in the firm and still fulfill all production demands. It is the single most powerful tool in guiding inventory planning, purchase management and production control. MRP is easy to operate and adds dramatically to profits.

MATERIAL FLOW
Efficient and Stream-lined processes are required to remain competitive in today's marketplace. Material flow, distribution, logistics, purchasing and planning are all important factors for success and competitiveness. Inventory Solutions can help you by optimizing your material flow. Material flow involves Production Planning, Purchasing, Just-In-Time (JIT), and Inventory Management / Inventory Control. Optimization of Material Flow can have the following benefits: Improve Product Quality Improve Product Quality Reduce Freight / Transportation Cost Reduce Manufacturing Waste Reduce Manufacturing Waste Increase Production Improve Customer Satisfaction Reduce Downtime Reduce Product Cost Increase Cash Flow Inventory Solutions can help to train the following personnel and help your company reduce costs: Materials Planners Purchasing Agents Inventory Control personnel Quality Assurance personnel Production Engineers Materials Management Professionals SOURCES: American Production and Inventory Control Society

Training Sessions Tailored to Your Needs

Inventory Solutions has created a training program that adapts to the needs of the customer. With professional instructors, certified in supply chain management, our training is second to none. Our training is set up based on your individual needs and created based on your suggested time frame. We use every resource necessary to provide your associates with the best possible understanding on the aspects of reducing, controlling, and maintaining all cost associated with supply chain management. Every effort is made to improve the vision of your associates ability to recognize the issues, challenges and opportunities related to the understanding and use of corporate strategies for profit maximization. Why Supply Chain Management? With the globalization of markets, stiffer competition, new technologies and demanding customers, supply chain management has become the rallying cry of business leaders from around the globe. Why? Because effective supply chain management lets you deliver products and services cheaper, faster, and better. In todays marketplace, you must have the competitive edge to survive and grow. Inventory Solutions will use its mastery of techniques, methods, and experiences, to help in areas such as: (a)Reduce Purchasing Cost (b)Just-In-time (c)Freight Negotiations (d) Optimal Stocking Levels (e) Supply Chain Management (f) Analytical Study (g)Excess Inventory (h) Reduce Raw Materials (i)Forecasting (j)Supplier Networking (k)Obsolete Inventory (l) Reduce WIP (m) Master Production Schedule (n) Material Flow (o)Central Warehousing (p) APICS Certification Preparation (q) Material Requirements Planning (r) CPM Certification Preparation Inventory Solutions has the ability to use real situations for your company and with a classroom setting, deep analytical understandings, and a strong networking system, find solutions that can be put to work immediately for you. Our services are here to improve the amount of cash flow and reduce your costs. We can guide you to establish corporate-wide supply chain management objectives to help bring over-stocks, under-stocks, obsolete / excess inventory, purchasing / freight negotiations and central warehousing logically into focus.

Inventory Solutions' broad range of services are available to anyone interested in reducing the amount of inventory they currently have and save millions of dollars from unnecessary inventory levels. We have the capability to analytically study your processes and provide you with optimal stocking levels. The benefit from this detailed process becomes more noticeable as cash increases to the bottom line. Inventory Solutions has developed a variety of services to achieve your inventory reduction objectives quickly, efficiently and with minimal effort from you. Our associate's extensive background in materials management enables an approach for every opportunity for savings to be defined to you for prioritization. Our experience and broad network of resources allow us to extend all avenues of total inventory reductions and to introduce the best possible savings available. During your review, we focus on the key inventory items which will have a highly leveraged impact on your inventory investment. This approach allows you to maximize the benefits while minimizing your effort.

Inventory Solutions is committed to providing immediate, prioritized and measurable results with no hidden costs. We will also train and explain by example the appropriate way to maintain the levels of inventory that your company requires to stay profitable

Our Training and Consulting Services can Reduce Your Cost for inventory control, freight, purchasing, materials management, JIT, manufacturing, warehousing, transportation, MRP, supply chain, stocking and more.

Our creativity can help you to setup networking with suppliers, reduce your freight costs, improve lead times, improve shipping performance, reduce raw material purchasing costs and improve your cash flow. We can find your optimal inventory stocking levels and improve materials flow.

Just-In-Time Manufacturing: JIT is a philosophy of continuous improvement in which non-value-adding activities (or wastes) are identified and removed for the purposes of: (a)Reducing Cost (d)Improving Delivery (b) Improving Quality (e) Adding Flexibility (c) Improving Performance (f) Increase innovativeness

JIT is not about automation. JIT eliminates waste by providing the environment to perfect and simplify the processes. JIT is a collection of techniques used to improve operations It can also be a new production system that is used to produce goods or services. The American Production and Inventory Control Society (APICS) have the following definition of JIT: "a philosophy of manufacturing based on planned elimination of all waste and continuous improvement of productivity. It encompasses the successful execution of all manufacturing activities required to produce a final product, from design engineering to delivery and including all stages of conversion from raw material onward. The primary elements include having only the required inventory when needed; to improve quality to zero defects; to reduce lead time by reducing setup times, queue lengths and lot sizes; to incrementally revise the operations themselves; and to accomplish these things at minimum cost." When the JIT principles are implemented successfully, significant competitive advantages are realized. JIT principles can be applied to all parts of an organization: order taking, purchasing, operations, distribution, sales, Just-in-time (JIT) is an inventory strategy implemented to improve the return on investment of a business by reducing in-process inventory and its associated carrying costs. In order to achieve JIT the process must have signals of what is going on elsewhere within the process. This means that the process is often driven by a series of signals, which can be Kanab ( Kanab?), that tell production processes when to make the next part. Kanban are usually 'tickets' but can be simple visual signals, such as the presence or absence of a part on a shelf. When implemented correctly, JIT can lead to dramatic improvements in a manufacturing organization's return on investment, quality, and efficiency. Some have suggested that "Just on Time" would be a more appropriate name since it emphasizes that production should create items that arrive when needed and neither neither earlier nor later. Quick communication of the consumption of old stock which triggers new stock to be ordered is key to JIT and inventory reduction. This saves warehouse space and costs. However since stock levels are determined by historical demand any sudden demand rises above the historical average demand, the firm will deplete inventory faster than usual and cause customer service issues. Some [1] have suggested that recycling Kanban faster can also help flex the system by as much as 10-30%. In recent years manufacturers have touted a trailing 13 week average as a better predictor for JIT planning than most fore castors could provide.[2]

Contents [Hide] a. History b. Philosophy c. Stocks d. Transaction cost approach e. Environmental concerns f. Price volatility g. Quality volatility h. Demand stability i. JIT Implementation Design j. Effects k. Benefits l. Problems M. Within a JIT system N. Within a raw material stream o. Oil [Edit] History The technique was first used by the Ford Motor Company as described explicitly by Henry Ford's My Life and Work (1923): "We have found in buying materials that it is not worthwhile to buy for other than immediate needs. We buy only enough to fit into the plan of production, taking into consideration the state of transportation at the time. If transportation were perfect and an even flow of materials could be assured, it would not be necessary to carry any stock whatsoever. The carloads of raw materials would arrive on schedule and in the planned order and amounts, and go from the railway cars into production. That would save a great deal of money, for it would give a very rapid turnover and thus decrease the amount of money tied up in materials. With bad transportation one has to carry larger stocks." This statement also describes the concept of "dock to factory floor" in which incoming materials are not even stored or warehoused before going into production. The concept needed an effective freight management system (FMS); Ford's Today and Tomorrow (1926) describes one. The technique was subsequently adopted and publicized by Toyota Motor Corporation of Japan as part of its Toyota Production System (TPS). However, Toyota famously did not adopt the procedure from Ford, but from Piggly Wiggly. Although Toyota visited Ford as part of its tour of American businesses, Ford had not fully adopted the Just-In-Time system, and Toyota executives were appalled at the piles of inventory laying around and the uneven work schedule of the employees of Ford. Toyota also visited Piggly Wiggly, and it was there that Toyota executives first observed a fully functioning and successful Just-In-Time system, and modeled TPS after it. It is hard for Japanese corporations to warehouse finished products and parts, due to the limited amount of land available for them. Before the 1950s, this was thought to be a disadvantage because it forced the production lot size below the

economic lot size. (An economic lot size is the number of identical products that should be produced, given the cost of changing the production process over to another product.) The undesirable result was poor return on investment for a factory. The chief engineer at Toyota in the 1950s, Taiichi Ohno examined accounting assumptions and realized that another method was possible. The factory could implement JIT which would require it to be made more flexible and reduce the overhead costs of retooling and thereby reduce the economic lot size to fit the available warehouse space. JIT is now regarded by Ohno as one of the two 'pillars' of the Toyota Production System. Therefore over a period of several years, Toyota engineers redesigned car models for commonality of tooling for such production processes as paintspraying and welding. Toyota was one of the first to apply flexible robotic systems for these tasks. Some of the changes were as simple as standardizing the hole sizes used to hang parts on hooks. The number and types of fasteners were reduced in order to standardize assembly steps and tools. In some cases, identical sub-assemblies could be used in several models. Toyota engineers then determined that the remaining critical bottleneck in the retooling process was the time required to change the stamping dies used for body parts. These were adjusted by hand, using crowbars and wrenches. It sometimes took as long as several days to install a large, multi-ton die set and adjust it for acceptable quality. Further, these were usually installed one at a time by a team of experts, so that the line was down for several weeks. So Toyota implemented a strategy now called Single Minute Exchange of Die (SMED), developed with Shigeo Shingo With very simple fixtures, measurements were substituted for adjustments. Almost immediately, die change times fell to hours instead of days. At the same time, quality of the stampings became controlled by a written recipe, reducing the skill level required for the change. Further analysis showed that a lot of the remaining time was used to search for hand tools and move dies. Procedural changes (such as moving the new die in place with the line in operation) and dedicated tool-racks reduced the die-change times to as little as 40 seconds. Today dies are changed in a ripple through the factory as a new product begins flowing. After SMED, economic lot sizes fell to as little as one vehicle in some Toyota plants. Carrying the process into parts-storage made it possible to store as little as one part in each assembly station. When a part disappeared, that was used as a signal (Kanban) to produce or order a replacement. [edit] Philosophy The philosophy of JIT is simple - inventory is defined to be waste. JIT inventory systems expose the hidden causes of inventory keeping and are therefore not a simple solution a company can adopt; there is a whole new way of working the company must follow in order to manage its consequences. The ideas in this way of working come from many different disciplines including statistics, industrial engineering, production management and behavioral science. In the JIT inventory philosophy there are views with respect to how inventory is looked

upon, what it says about the management within the company, and the main principle behind JIT. Inventory is seen as incurring costs, or waste, instead of adding value, contrary to traditional accounting. This does not mean to say JIT is implemented without awareness that removing inventory exposes pre-existing manufacturing issues. Under this way of working, businesses are encouraged to eliminate inventory that does not compensate for manufacturing issues, and then to constantly improve processes so that less inventory can be kept. Secondly, allowing any stock habituates the management to stock keeping and it can then be a bit like a narcotic. Management is then tempted to keep stock there to hide problems within the production system. These problems include backups at work centres, machine reliability, and process variability, lack of flexibility of employees and equipment, and inadequate capacity among other things. In short, the just-in-time inventory system is all about having the right material, at the right time, at the right place, and in the exact amount, without the safety net of inventory. The JIT system has implications of which are broad for the implementors. [Edit] Stocks JIT emphasiss inventory as one of the seven wastes (overproduction, waiting time, transportation, inventory, processing, motion and product defect), and as such its practice involves the philosophical aim of reducing input buffer inventory to zero. Zero buffer inventories means that production is not protected from exogenous (external) shocks. As a result, exogenous shocks reducing the supply of input can easily slow or stop production with significant negative consequences. For example,[3] Toyota suffered a major supplier failure as a result of the 1997 Aisin fire which rendered one of its suppliers incapable of fulfilling Toyota's orders. In the U.S., the 1992 railway strikes resulted in General Motors having to idle a 75,000-worker plant because they had no supplies coming in. [Edit] Transaction cost approach JIT reduces inventory in a firm. However, unless it is used throughout the supply chain, it can be hypothesized that firms are simply outsourcing their input inventory to suppliers (Naj 1993). This effect was investigated by Newman (1993), who found, on average, suppliers in Japan charged JIT customers a 5% price premium. [edit] Environmental concerns During the birth of JIT, multiple daily deliveries were often made by bicycle; with increases in scale has come the adoption of vans and Lorries (trucks) for these deliveries. Cusumano (1994) has highlighted the potential and actual problems this causes with regard to gridlock and the burning of fossil fuels. This violates three JIT wastes: 1) Time; wasted in traffic jams 2) Inventory; specifically pipeline (in transport) inventory and 3) Scrap; with respect to petrol or diesel burned while not physically moving. [edit] Price volatility

JIT implicitly assumes a level of input price stability such that it is desirable to inventory inputs at today's prices. Where input prices are expected to rise storing inputs may be desirable. [edit] Quality volatility JIT implicitly assumes the quality of available inputs remains constant over time. If not, firms may benefit from hoarding high quality inputs. [edit] Demand stability Karmarker (1989) highlights the importance of relatively stable demand which can help ensure efficient capital utilization rates. Karmarker argues without a significant stable component of demand, JIT becomes untenable in high capital cost production. In the U.S., the 1992 railway strikes resulted in General Motors having to idle a 75,000-worker plant because they had no supplies coming in. [edit] kutte [edit] JIT Implementation Design Based on a diagram modeled after the one used by Hewlett-Packards Boise plant to accomplish its JIT program. 1) F Design Flow Process - F Redesign/relay out for flow - L Reduce lot sizes - O Link operations - W Balance workstation capacity - M Preventative maintenance - S Reduce Setup Times 2) Q Total quality control - C worker compliance - I Automatic inspection - M quality measures - M fail-safe methods - W Worker participation 3) S Stabilize Schedule - S Level Schedule - W establish freeze windows - UC Underutilize Capacity 4) K Kanban Pull System - D Demand pull - B Back flush - L Reduce lot sizes 5) V Work with vendors - L Reduce lead time - D Frequent deliveries - U Project usage requirements - Q Quality Expectations

6) I further reduce inventory in other areas - S Stores - T Transit - C Implement Carrousels to reduce motion waste - C Implement Conveyor belts to reduce motion waste 7) P Improve Product Design - P Standard Production Configuration - P Standardize and reduce the number of parts - P Process design with product design - Q Quality Expectations [edit] Effects Some of the initial results at Toyota were horrible, but in contrast to that a huge amount of cash appeared, apparently from nowhere, as in-process inventory was built out and sold. This by itself generated tremendous enthusiasm in upper management. Another surprising effect was that the response time of the factory fell to about a day. This improved customer satisfaction by providing vehicles usually within a day or two of the minimum economic shipping delay. Also, many vehicles began to be built to order, completely eliminating the risk they would not be sold. This dramatically improved the company's return on equity by eliminating a major source of risk. Since assemblers no longer had a choice of which part to use, every part had to fit perfectly. The result was a severe quality assurance crisis, and a dramatic improvement in product quality. Eventually, Toyota redesigned every part of its vehicles to eliminate or widen tolerances, while simultaneously implementing careful statistical controls for quality control. Toyota had to test and train suppliers of parts in order to assure quality and delivery. In some cases, the company eliminated multiple suppliers. When a process problem or bad parts surfaced on the production line, the entire production line had to be slowed or even stopped. No inventory meant that a line could not operate from in-process inventory while a production problem was fixed. Many people in Toyota confidently predicted that the initiative would be abandoned for this reason. In the first week, line stops occurred almost hourly. But by the end of the first month, the rate had fallen to a few line stops per day. After six months, line stops had so little economic effect that Toyota installed an overhead pull-line, similar to a bus bell-pull, that permitted any worker on the production line to order a line stop for a process or quality problem. Even with this, line stops fell to a few per week. The result was a factory that eventually became the envy of the industrialized world, and has since been widely emulated. The just-in-time philosophy was also applied to other segments of the supply chain in several types of industries. In the commercial sector, it meant eliminating one or all of the warehouses in the link between a factory and a retail establishment.

[edit] Benefits As most companies use an inventory system best suited for their company, the Just-In-Time Inventory System (JIT) can have many benefits resulting from it. The main benefits of JIT are listed below. 1. Set up times are significantly reduced in the factory. Cutting down the set up time to be more productive will allow the company to improve their bottom line to look more efficient and focus time spent on other areas that may need improvement. This allows the reduction or elimination of the inventory held to cover the "changeover" time, the tool used here is SMED. 2. The flows of goods from warehouse to shelves are improved. Having employees focused on specific areas of the system will allow them to process goods faster instead of having them vulnerable to fatigue from doing too many jobs at once and simplifies the tasks at hand. Small or individual piece lot sizes reduce lot delay inventories which simplifies inventory flow and its management. 3. Employees who possess multiple skills are utilized more efficiently. Having employees trained to work on different parts of the inventory cycle system will allow companies to use workers in situations where they are needed when there is a shortage of workers and a high demand for a particular product. 4. Better consistency of scheduling and consistency of employee work hours. If there is no demand for a product at the time, workers dont have to be working. This can save the company money by not having to pay workers for a job not completed or could have them focus on other jobs around the warehouse that would not necessarily be done on a normal day. 5. Increased emphasis on supplier relationships. No company wants a break in their inventory system that would create a shortage of supplies while not having inventory sit on shelves. Having a trusting supplier relationship means that you can rely on goods being there when you need them in order to satisfy the company and keep the company name in good standing with the public. 6. Supplies continue around the clock keeping workers productive and businesses focused on turnover. Having management focused on meeting deadlines will make employees work hard to meet the company goals to see benefits in terms of job satisfaction, promotion or even higher pay. [edit] Problems [edit] Within a JIT system The major problem with just-in-time operation is that it leaves the supplier and downstream consumers open to supply shocks and large supply or demand changes. For internal reasons, this was seen as a feature rather than a bug by Ohno, who used the analogy of lowering the level of water in a river in order to expose the rocks to explain how removing inventory showed where flow of production was interrupted. Once the barriers were exposed, they could be removed; since one of the main barriers was rework, lowering inventory forced each shop to improve its own quality or cause a holdup in the next downstream area. One of the other key tools to manage this weakness is production levelling to remove these variations. Just-in-time is a means to improving performance of the system, not an end.

With very low stock levels meaning that there are shipments of the same part coming in sometimes several times per day, Toyota is especially susceptible to an interruption in the flow. For that reason, Toyota is careful to use two suppliers for most assemblies. As noted in Liker (2003), there was an exception to this rule that put the entire company at risk by the 1997 Aisin fire. However, since Toyota also makes a point of maintaining high quality relations with its entire supplier network, several other suppliers immediately took up production of the Aisin-built parts by using existing capability and documentation. Thus, a strong, long-term relationship with a few suppliers is preferred to short-term, price-based relationships with competing suppliers. This long-term relationship has also been used by Toyota to send Toyota staff into their suppliers to improve their suppliers' processes. These interventions have now been going on for twenty years and result in improved margins for Toyota and the supplier as well as lower final customer costs and a more reliable supply chain. Toyota encourages their suppliers to duplicate this work with their own suppliers. [edit] Within a raw material stream The quality of this article or section may be compromised by peacock terms: wording that promotes the subject in a subjective manner without imparting real information. You can help Wikipedia by removing peacock terms or finding content which backs the claims. As noted by Liker (2003) and Womack and Jones (2003), it would ultimately be desirable to introduce synchronised flow and linked JIT all the way back through the supply stream. However, none followed this in detail all the way back through the processes to the raw materials. With present technology, for example, an ear of corn cannot be grown and delivered to order. The same is true of most raw materials, which must be discovered and/or grown through natural processes that require time and must account for natural variability in weather and discovery. The part of this currently viewed as impossible is the synchronised part of flow and the linked part of JIT. It is for the reasons stated raw materials companies decouple their supply chain from their clients' demand by carrying large 'finished goods' stocks. Both flow and JIT can be implemented in isolated process islands within the raw materials stream. The challenge then becomes to achieve that isolation by some means other than the huge stocks they carry to achieve it today. It is because of this almost all value chains are split into a part which makes-toforecast and a part which could, by using JIT, become make-to-order. Often, historically, the make-to-order part has been within the retailer portion of the value chain. Toyota's revolutionary step has been to take Piggly Wiggly's supermarket replenishment system and drive it back to at least half way through their automobile factories. Their challenge today is to drive it all the way back to their goods-inwards dock. Of course, the mining of iron and making of steel is still not done specifically because somebody orders a particular car. Recognising JIT

could be driven back up the supply chain has reaped Toyota huge benefits and a world dominating position in the auto industry. It should be noted that the advent of the mini mill steelmaking facility is starting to challenge how far back JIT can be implemented, as the electric arc furnaces at the heart of many mini-mills can be started and stopped quickly, and steel grades changed rapidly. [edit] Oil It has been frequently charged that the oil industry has been influenced by JIT.[4] [5][6] The argument is presented as follows: The number of refineries in the United States has fallen from 279 in 1975 to 205 in 1990 and further to 149 in 2004. As a result, the industry is susceptible to supply shocks, which cause spikes in prices and subsequently reduction in domestic manufacturing output. The effects of hurricanes Katrina and Rita are given as an example: in 2005, Katrina caused the shutdown of 9 refineries in Louisiana and 6 more in Mississippi, and a large number of oil production and transfer facilities, resulting in the loss of 20% of the US domestic refinery output. Rita subsequently shut down refineries in Texas, further reducing output. The GDP figures for the third and fourth quarters showed a slowdown from 3.5% to 1.2% growth. Similar arguments were made in earlier crises. Beside the obvious point that prices went up because of the reduction in supply and not for anything to do with the practice of JIT, JIT students and even oil & gas industry analysts question whether JIT as it has been developed by Ohno, Goldratt, and others is used by the petroleum industry. Companies routinely shut down facilities for reasons other than the application of JIT. One of those reasons may be economic rationalization: when the benefits of operating no longer outweigh the costs, including opportunity costs, the plant may be economically inefficient. JIT has never subscribed to such considerations directly; following Waddel and Bodek (2005), this ROI-based thinking conforms more to Brownstyle accounting and Sloan management. Further, and more significantly, JIT calls for a reduction in inventory capacity, not production capacity. From 1975 to 1990 to 2005, the annual average stocks of gasoline have fallen by only 8.5% from 228,331 to 222,903 bbls to 208,986 (Energy Information Administration data). Stocks fluctuate seasonally by as much as 20,000 bbls. During the 2005 hurricane season, stocks never fell below 194,000 thousand bbls, while the low for the period 1990 to 2006 was 187,017 thousand bbls in 1997. This shows that while industry storage capacity has decreased in the last 30 years, it hasn't been drastically reduced as JIT practitioners would prefer. Finally, as shown in a pair of articles in the Oil & Gas Journal, JIT does not seem to have been a goal of the industry. In Waguespack and Cantor (1996), the authors point out that JIT would require a significant change in the supplier/refiner relationship, but the changes in inventories in the oil industry exhibit none of those tendencies. Specifically, the relationships remain costdriven among many competing suppliers rather than quality-based among a select few long-term relationships. They find that a large part of the shift came about because of the availability of short-haul crudes from Latin America. In the

follow-up editorial, the Oil & Gas Journal claimed that "casually adopting popular business terminology that doesn't apply" had provided a "rhetorical bogey" to industry critics. Confessing that they had been as guilty as other media sources, they confirmed that "It also happens not to be accurate." accounting, design, etc. Elimination of Waste: JIT usually identifies seven prominent types of waste to be eliminated: (a)Waste from Overproduction (c)Transportation Waste (e)Processing Waste (g)Waste from Product Defects Summary: Material related costs are reduced by reducing the number of suppliers a company deals with and developing long-term contracts through creative supplier networking, eliminating the need to count individual parts, reducing order scheduling, eliminating expediting, simplifying receiving systems, eliminating receiving inspection, eliminating most unpacking, eliminating the stocking of inventory and eliminating excess material spoilage. Manufacturing related costs are reduced by design for manufacture and design for assembly techniques where unnecessary parts or processes are eliminated. They are also reduced through the elimination of excess material handling, inspections, and storage of parts. The primary goal is to eliminate non-value adding tasks. Quick change over techniques replaces long set-up times. Cells will replace traditional assembly lines. Visual controls are often used to schedule the production of parts in place of systems such as MRP. Statistical process control is used to assure that the outcome of production is consistently met with desired results. (b) Waste of waiting/idle time (d) Inventory Waste (f) Waste of Motion

Methods Of Valuation Of Inventories:

According to international Accounting Standrad:2 (IAS:2), the inventories should be valued at the lowest of : (a)Historical cost (b)Net realizable value

Historical cost: Historical cost of inventories is the aggregate of cost purchase, cost of conversion, and other costs incurred in bringing the inventories to their present location and condition. Thus, historical cost includes not only the price paid for acquisition of inventories but also all costs incurred in for bringing and making them fit for use in production or for sale, e.g., transportation costs, duties paid, insurance, manufacturing expanses, wages or manufacturing expenses incurred for converting raw material into finished products, etc. selling expenses such as advertisement expenses or storage costs should not be included. A major objective of accounting for inventories is the proper determination of income through the process of matching appropriate costs against revenues. It requires assigning of proper costs to inventory as well as goods sold. However, it should be noted that assigning of such costs need not conform to the physical flow of goods. The various methods for assigning historical costs to inventory and goods sold are being explained below. 1. 2. 3. 4. 5. 6. 7. specific identification method first in first out method (FIFO) last in first out method (LIFO) highest in first out method (HIFO) base stock method next in first out method (NIFO) weighted average price method

1. specific identification method: According to this method, each item of inventory is identified with its cost. The total of the various costs so identified constitutes the value of inventory. This method is generally used when the materials or goods have been purchased for a specific job or customer. Such materials or goods are earmarked for the job and sold to that particular job or customer whenever demanded. This technical of inventory can be adopted only by a company which is handling a small number of inventory items. In case of a manufacturing company having a number of inventory items, it is almost impossible to identify the cost of each individual items of inventory. Thus, this method is inappropriate in most cases on account of practical consideration.

2. first in first out method (FIFO): Under this method, it is assumed that the materials/goods first received are the first to be issued/sold. Thus, according to this method, the inventory on a particular date is presumed to be composed of the items which have been acquired most recently. 3. Last in first out method (NIFO): This method is based on the assumption that last item of materials/goods purchased are the first to be issued/sold. Thus, according to this method, inventory consists of items purchased at the earliest cost. FIFO and NIFO Method and markets fluctuations: Both FIFO and NIFO method of pricing inventories are based on actual cost and hence both value the products manufactured at true costs. However, both have conflicting results in period of rising and falling prices. In period of rising prices: In period of rising pricing, FIFO method will result in production being relatively undercharged, since replenishment of stock will be at higher prices then the prices of issue of materials. On the same pattern the cost of goods sold will also be relatively deflated. Thus, profit will be inflated and there will be more liability for payment of taxes. The situation will be just the reverse if LIFO method is followed the production will be relatively overcharged resulting in lower profitability. In period of falling prices : In period of falling prices, FIFO method will result in production being relatively overcharged, resulting in deflating the profits, and reducing the income tax liability. The reverse will be the case in case if LIFO method is followed. Production will be charged at most recent price of purchase of materials or goods, resulting in inflating of profits and increasing the tax liability. In period of rising prices, the inventory will be valued in FIFO method at a price higher than that in case of LIFO method. The reverse will be the case in case of falling prices. Thus, it may be concluded that in period of rising price LIFO method tends to give a more meaningful come statement but a less realistic balance sheet, whereas FIFO method gives a more meaningful balance sheet but a less realistic income statement. The reverse will be the situation in period of falling prices. It may also be noted that no sweeping generalisation can be made regarding superiority of LIFO over FIFO or vice versa.

4. Highest in first out method (HIFO): According to this method, the inventory of material or goods should be valued at the lowest possible price. Material or goods purchased at the highest prices are treated as being first issued/sold irrespective of the date of purchase. This method is very suitable when the market is constantly fluctuating because cost of heavily priced materials or goods is recovered from the production or sales at the earliest. However, the method involves too many calculations as in the case of FIFO and LIFO method. The method has therefore, not been adopted widely. 5. Base stock method : The method is based on the contention that each enterprise maintains at all times a minimum quantity of materials or finished goods in its stock. This quantity is termed as base stock. The base stock is demand to have been created out of the first lot purchased and, therefore, it is always valued at this price and is carried forward as a fixed asset. Any quantity over and above the base stock is valued in accordance with any other appropriate method. As this method aims at matching current costs to current sales, the LIFO method will be the most suitable for valuing stock of materials or finished goods other then the base stock. The base stock method has the advantage of charging out materials/goods at actual cost. Its other merits or demerits will depend on the method which is used for valuing materials other than the base stock. 6. Next in first out method (NIFO) : The method attempts to value materials issued or goods sold at actual price which is the nearest possible to the market price. Under this method, the issued are made at the price of materials or goods which has been ordered but not yet received. In other words issue of goods for further processing or sale are made at latest price at which the company has been committed even though materials/goods have not yet been physically received. This method is better than the market price method under which the market price of materials or goods issued or sold will have to be ascertained every time. In case of this method, the materials or goods will be issued at the price at which a new order has been placed and this price will hold good for all future issues till a next order is placed.

7. Weighted average price method : This method is based on the presumption that once the materials or goods are put into a common bin, they lose their separate identity. Hence, the inventory consists of no specific batch of goods. The inventory is thus priced on the basis of average price paid for the goods, weighted according to the quantity purchased at each price. Net realizable value According to international accounting standard:2(IAS:2), the net realizable value means the estimated selling price in the ordinary course of business less costs of completion and less costs necessarily to be incurred in order to make the sale. Thus, net realizable value is to be calculated after taking into consideration all expenses which might have to be incurred for making sales. Inventories are to be valued at cost or net realizable value, whichever is less. The ascertainment of net realizable value of different items and its comparison with the historical costs can be done by any of the following method: 1. Aggregate or total inventory method : According to this method, the total cost price of the different items of inventories are calculated and the total, so calculated, is compared with the total if realizable value of the different items of inventory. Inventory is valued at a price which is the least of the two. 2. Group method : According to this method, groups are formed of homogeneous items of inventory. The cost and the realizable value each group so formed are found out. The least of the two, cost or net realizable value of each group of items, is taken for valuation of inventory. 3. Item by item method : According to this method, the costs and net realizable prices of each items of inventory are found out. Each items is valued at a price of the cost or net realizable value whichever is the least.

CHAPETR -4

Suggested policy guidelines for A, B & C classes of items

A. items (High cons. Val) Very strict cons. control No or very low safety stock Phased delivery (Weekly) Weekly control report Maximum follow up As many sources as possible Accurate forecasts Central purchasing /storage Max.efforts to control LT To be handled by Sr.officers B. items (Moderate cons. Val) Moderate control Low safety stock Once in three months Monthly control report Periodic follow up two or more reliable Estimates on past data Combination purchasing Moderate Middle level C. item (Low cons. Val) loose control High safety stock once in 6 months Quarterly report Exceptional Two reliable Rough estimate Decentralized Min.clerical efforts can be delegated

Basic Inventory Models (EOQ) Examples On the basis of the theory developed here some of the example of the basic inventory models are given below for easy understanding of the concept as well as to enable one solve the day to day Inventory problems too as far as determining the Economic Order Quantities , Time for ordering etc,.are concerned The Classical Model Demand rate: Ordering cost: Holding cost: Optimal Ordering Is: Optimal Cycle Is: Number of Orders Is: Total Cost Is: X C1 C2 Q* T* n* TC Shortages Permitted Model Demand rate: Ordering cost: Holding cost: Shortage cost: Backorder cost: Optimal Ordering Is: Optimal Shortage Is: Total Cost Is: Shortage Period Is: Period per Cycle Is: X C1 C2 C3 C4 Q* S* TC T2 T

Production and Consumption Model Production rate: Demand rate: Holding cost: Set-up cost: Optimal Run Size Is: Production Cycle Is: Optimal Cycle Is: Cost per Cycle Is: K X C2 C1 Q* T 1* T* TC Production and Consumption with Shortages Model Production rate: Demand rate: Setup cost: Holding cost: Backorder cost: Optimal Production Is: Optimal Inventory Is: Optimal Shortage Is: Total Cost Is: Period per Cycle Is: K X C1 C2 C4 q* Q* P* TC T

EOQ with Shortages and Lead Time I: Base Economic Order Quantity Total Demand 500 Ordering Cost 15 Holding Cost/unit/year 20 Unit Price 250 EOQ --Average Periodic Ordering Intervals --Total Number of Orders --Total Cost --II: EOQ with Shortages and Lead Time Estimated Lead Time in Days 15 Shortage Cost/unit/year 5 EOQ -Level for Reorder Point -Maximum Inventory Level -Total Cost -Longest Delay Time in Days --

Elementary inventory models (with deterministic demand) Let us onsider the inventory models in which demand is assumed to be fixed and completely pre-determined. The inventory models with uncertain demand are considered later. And leadSince quantity Q is ordered every time an order is placed and since the rate of demand is D, the time between two successive orders (T) will be 0/0. teh figure 1 shows the inventory level Vs Time rotation ship.

Invento ry Level

Time: From Fig.1 it is obvious that since the inventory is consumed at uniform rate and since maximum inventory level is Q, the averaghe inventory will be Q/2. Hence, Average Investment in Inventory will be = Q/2.v And the average Inventory Holding Cost will be = Q/2. ve .... (2) Hence the total annual variable cost (TC) = ordering cost + Inventory Holding Cost.

AD AD = * Q 2 AD rv = ADrv 2 1 1 Q.rv = 2 2 = = 2 AD .rv rv ADrv 2 ADrv + 2 ...(8)

...(9) ADrv 2

TC * = 2 ADrv

The relationship between (1) Annual (2) Inventory (3) Total Annual Cost

order

quantity ordering Holding

and cost cost

Is given in Figure 2 TC

Total cost =

Average Inventory Holding Cost = Q/2. vr TC *

AnnualorderCosts=D/Q.A 0 Q* Reorder Level with Fixed Lead Time

Economic Order Quantity and

In the above discussion and in figure 1 are considered that load time is zero. However, if lead time is constant the above results can be used without any modification. If lead time is say constant and equal to L (in years) then during lead time, consumption is LD units. This lans that as soon as the inventory Q level reaches LO units, a new order will have to be released for Quantity G*, the new order will arrive exactly after time period L at which time inventory level will be zero and the system will repeat itself. The inventory level at which the order is released is known as reorder level (R=0) i.e. Rp=LD. (Figure 3 shows the inventory level vs time the constant lead time situation.

See Inventory numericals here

Invent ory Level

4.3 Properties of EOQ model and Sensitivity Analysis In the above nodal, various parameters are used such as demand (D), inventory carrying charges factor (r), ordering or set-up cost (A). These parameters are estimated and though they are assumed to be known, in real life what we have is an estimated value which may be different than real value for various reasons.

For this reason it is important for practical purposes to test the results of the EQQ model and find how sensitive the results are to the changes in various parameters. The sensitivity can be explored in various ways. Let the true rate of demand is D, true value of order cost is A, true value of inventory holding cost is r and true value 9of unit purchase cost or production cost is v. Then the true optimal value of order quantity (Q*) will be, (be eqn. 8),

I T1 T . + o( 2 ) 2 T T I T1 2 T

(Q S ) 2 .vr 2Q

2 I = T1I T . 2 DI + o( 2 ) 2 T T2 ( Q S I = T1 ) 2 T 2Q

(Q S ) 2 .vr 2Q

I2 2 DI 2 (T Q 1 S )S T2 = = n( ) + . T 2Q 2 T ST = 2 2T =

Average units short =

S2 S2 = 2 DT 2Q

S2 Shortage cos t = .b 2Q

Therefore total average annual cos t (TC ) will be A.D (Q S ) 2 S2 TC = + .vr + .b Q 2Q 2Q

TC S There TC 2 (Q * S * ) 2S * = .vr + .b S 2Q * 2Q * vr + S* S* vr + .b = 0 Q* Q* =0 and TC Q

S* =

Q * vr (vr + b)

S (Q * S * ) 2 TC AD 2(Q * S * ) vr = + vr * 2 .b = 0 2 2 * * * Q 2Q 2 Q* Q 2Q Substituti ng equation.(16) in above equation we get 2 AD (rv + b) . rv b

Q* =

In case when shortage costs are infinitely high (i.e. when shortages are not allowed) b = and eqn. 17 will reduce to

2 AD rv Which is same as equation (6), i.e. optimal order quantity for the E0model. This is obvious since the EOQ model assume that no shortages are allowed which imply that the shortage are infinite. Q* =

T1 S T )+ . 2 T 2 T ST = 2 2T = n(

Average units short = S2 Shortage cos t = .b 2Q

S2 S2 = 2 DT 2Q

Therefore total average annual cos t (TC ) will be A.D (Q S ) 2 S2 TC = + .vr + .b Q 2Q 2Q

TC S There TC 2 (Q * S * ) 2S * = .vr + .b S 2Q * 2Q * vr + S* S* vr + .b = 0 Q* Q* =0 and TC Q

S* =

Q * vr (vr + b)

S (Q * S * ) 2 TC AD 2(Q * S * ) vr = + vr * 2 .b = 0 2 2 * * * Q 2Q 2 Q* Q 2Q Substituti ng equation.(16) in above equation we get 2 AD (rv + b) . rv b

Q* =

In case when shortage costs are infinitely high (i.e. when shortages are not allowed) b = and eqn. 17 will reduce to

2 AD rv Which is same as equation (6), i.e. optimal order quantity for the E0model? This is obvious since the EOQ model assume that no shortages are allowed which imply that the shortages are infinite. Q* =

Item Number ALMIRA01 ALMIRA 3'X2'.5" BEA22230 BEARING 22230 M BEA22322 BEARING 22322 K BEA30214 BEARING 30214 BEAR1207 BEARING 30306 BEAR1208 BEARING HOUSING C.I. FOR CPKGC 32-200 BEAR1209 BEARING HOUSING FOR PUMP MEGA-G-32/160 MAKE[KSB] BEAR6200 BEARING 6200 BEAR7306 BEARING 7306 BEBLT001 RUBBER SHEET 1MX4MX6MM BELTB102 BELT B-102 BLB00001 BERUTAX GREASE M21 EPK 1 TIN OF 5 KG BLB00002 ENKLO 320 (DRUM OF 210 L TR.) BLB00003 ENKLO 46 (DRUM OF 210 LT R.) BLB00004 EP GEAR OIL OMALA-220 SH ELL MAKE-SHELL BLB00005 GREASE FUCHS RENOLIT FWA 160 (BURGMAN) BLB00006 GREASE MULTIPURPOSE H.P. BLB00007 HEXANE RESISTANT MOSIL G REASE BLB00008 HRO OIL VEEDOL (DRUM OF 210 LITRE) BLB00009 LUBRICATING GREASE KSB8

UM NO NO NO NO NO NO

ABC C C C C C B

NO

NO NO Kg NO Kg

C C B B C

LT

LT

LT

LT

Kg Kg

B C

LT

Kg

Items for Minimum-Maximum-Re-order Level and ABC Classification for uploading in MFG-Pro
Sr.No. 1 2 3 4

Group

Item Code & Descriptions

ALMIRA01 ALMIRA 3'X2'.5" BEA22322 BEARING 22322 K BEAR1207 BEARING 30306 BEAR1208 BEARING HOUSING C.I.FOR CPKGC32/160 MAKE[KSB] BEAR1209 BEARING HOUSING FOR PUMP MEGAG-32/160[KSB] BEAR6200 BEARING 6200 BEBLT001 RUBBER SHEET 1MMX4MMX6MM BELTB102 BELT B-102 BLB00001 BERUTAX GREASE M21 EPK 1 TIN OF 5 KG BLB00002 ENKLO 320 (DRUM OF 210 Ltr.) BLB00003 ENKLO 46 (DRUM OF 210 LTR.) BLB00004 EP GEAR OIL OMALA-220 SHELL MAKE BLB00005 GREASE FUCHS 160(BURGMAN) BLB00006 GREASE MULTIPURPOSE H.P. BLB00007 HEXANE RESISTANT MOSIL GREASE BLB00008 HRO OIL VEEDOL (DRUM OF210 LTR) BLB00009 LUBRICATING 01113-020 BLB00010 LUBRICATING OIL FRIDGE N68 BLB00011 MOLY COT GREASE BLB00012

UM NO NO NO NO

Minimu m Level 0 1 0 1

Maximum Level 0 2 0 2

Re-Order Level 0 0 0 0

Qty Hand 0 0 0 2

on General Items General Items Bearing & Acessories Bearing & Acessories Bearing & Acessories Bearing & Acessories Bearing & Acessories Bearing & Acessories

NO

Bearing & Acessories Bearing & Acessories

6 7 8 9

NO Kg NO Kg

4 0 1 0

13 0 3 5

3 0 1 0

13 0 2 0

Bearing & Acessories Bearing & Acessories Bearing & Acessories Bearing & Acessories V Belt & Pully V Belt & Pully Oil & Lubricants Oil & Lubricants

10 11 12 13

LT LT LT LT RENOLIT FWA

100 100 100 0

420 420 420 10

210 210 210 0

176 64 158.5 0

Oil & Lubricants Oil & Lubricants Oil & Lubricants Oil & Lubricants Oil & Lubricants Oil & Lubricants Oil & Lubricants Oil & Lubricants

14 15 16 17

Kg Kg LT Kg GREASE KSB80015-

100 0 210 0

360 20 420 5

100 0 210 0

117 0 165 0

Oil & Lubricants Oil & Lubricants Oil & Lubricants Oil & Lubricants Oil & Lubricants Oil & Lubricants Oil & Lubricants Oil & Lubricants

18 19 20

LT NO LT

0 0 0

0 4 5

0 0 0

0 0 1

Oil & Lubricants Oil & Lubricants Oil & Lubricants Oil & Lubricants Oil & Lubricants

Employing Good Principles Of Inventory Management

In the business world, not everyone follows good principles that aid in their success. However, the principles of inventory management cannot be ignored if you expect to maintain a quality business with a good reputation for always being able to assist a customer. Employing good principles is the best way to profit in any industry because it keeps you afloat in a world of chaos and madness. Principles maintain organizational quality and responsibility to a project, aspects that are most important in inventory management. Cleanliness and Organization The principles of inventory management are simple and easy to follow, if you simply make it a point to do so. For example, one of the top priorities in inventory management is to maintain a clean, organized warehouse in which all items are properly stored and labeled. This is important for several reasons. First of all, cleanliness is important for you and your staff, as well as for any products you store. You dont want the appearance of dust and dirt to have a client thinking that no one has purchased from you in years, and you certainly dont want grime buildup to cause items to become damaged or ruined. Organized storage and labeling allows you to easily locate and order, pull, or stock any item in your warehouse without a long, difficult search. Stock Rotation If you employ good principles of inventory management, youll be certain to rotate your stock, selling through older stock before delving into new shipments. This will assure that you always have fresh product and dont lose money by having to write off old items that were never sold or used. It also means that, again, none of your items appear as though theyve been in the warehouse untouched for years because they wont have time to build up dust and dirt to a significant degree. Tracking Keeping careful track of all of the items in your warehouse is one of the best principles of inventory management. How can you possibly sail smoothly and run an efficient department if you dont know part numbers and quantities you have in stock or where they may be located in your warehouse? Obviously, you can benefit greatly by employing just a few basic principle of inventory management in your workplace. The more you work towards running a tight ship, the better off youll be as a manager, and the more profitable your department or business will be.

Being In Charge Inventory Control Management After several years of being a forklift driver or stocker, youve been promoted, and now you are in charge. What this means for you is more than a raise it also means an incredible responsibility for inventory control management. Now, its your job to see that stock levels are maintained in a reasonable fashion and that all items are accounted for when inventory checks are made. It means that the organization of inventory for an entire department or warehouse is now your responsibility. What can you do to ease the burden of such a hefty load? Here are a few dos and donts to get you going. DO employ individuals who are willing to accept a great deal of responsibility. You cannot be present at all times, and it is vital that you have a staff you can trust to follow proper stocking procedures and maintain operations honestly when you are not around. DONT depend completely on another individual. You are the manager, and inventory control management is solely your responsibility. While it is perfectly acceptable to delegate some of that responsibility to others in your employ, you should not place all the burden on the shoulders of another or even several others. DO perform regular reconciliation checks of your inventory in between formal inventory checks to verify that no items are unaccounted for. This will also help to check for any errors in the placement of items within your warehouse space, as well as in the documenting of incoming and outgoing items. DO regularly rotate the stock and teach your employees to do the same. Leaving older items tucked beneath new stock of the same product is poor inventory control management that results in the eventual loss of the older items due to expiration. DONT overextend the budget. Part of good inventory control management is ordering smartly. Never purchase too much of a single item, even one that sells quickly. Especially if the stock is of high cost to you, make sure you only keep on hand what is necessary for any period of time. This also holds true with perishable goods. DO track the sales of items and determine what brings in the most profit for your department. These are the items that youll want to make sure you never to deplete in your inventory, always having enough on hand to meet the demand for the product. On the other hand, slow sellers should be maintained at bare minimum levels. DO make sure everything is properly organized and labeled for easy location within the warehouse. The larger your warehouse, the more important this level of organization is to the success and smooth functioning of your department. DONT let employees get lazy; keep them motivated, and refresh their knowledge with brief training classes that provide an overview of the inventory policies in your department.

DO be regimental and habitual about following guidelines, and set a fine example for others in your adherence to these regulations. They are provided to make your job and the job of your employees easier to do. Keeping An Inventory Management Database For Easy Reference If you are in charge of a small warehouse or storage space, you may not realize how important implementing an inventory management database can be. Keeping an inventory management database can help you be certain of models and quantities you have on hand. Supplies of books, CDs, office supplies, and any other items can be tracked through a simple database without employing any complex or expensive software equipment and will assist you in knowing how much youre keeping on your shelves. Use of an inventory management database can range from simply monitoring the number of items on hand to determining cost of the items that you are keeping and profitability from sales. Advantages Databases also allow you to index materials based on various details for search options. For example, an inventory management database can be implemented in a bookstore to allow the owner to index the books carried by author, title, subject, and any other fields that are built into the database. For those looking for a way to keep track of sales, an inventory management database can be configured to keep track of the cost and sell price of an item so that, when it is purchased, the profit is logged. Knowing the quantity of items on hand also allows you to reorder products when the stock is low. For example, if you have a small office supply store and you are down to the last three packages of your best-selling pens, you may overlook it unless you have an inventory management database to alert you of the low stock level. While most large companies use some sort of software to keep track of inventory, many small businesses forego such important systems. Using an inventory management database to keep track of your items can be essential to the success of your small business.

Familiarizing Yourself With The Essentials Of Inventory Management As a department manager of any type of supply market, whether books, food, or any other kind of stocked items, it is necessary to understand the essentials of

inventory management so that you can maintain a healthy supply of stock while not overtaxing your budget or storage space. When managing your inventory levels, you must have enough quantity, as well as variety, in order to please the customer (whether your customer is in-house or a general consumer). However, you must also take into account several factors that concern your position as the department manager. Concern for Space For example, your storage or warehousing space will greatly effect decisions you make regarding the amount of products and supplies you keep on hand at any given time. If you have extra space in your warehouse, you should analyze what products are the best sellers, or the fastest moving items, so that you can wisely fill that space with these items. At the same time, you dont want to overstock on expensive or slow-moving items. Movement of Product Always look at how well your inventory moves prior to ordering. This is essential in inventory management in order to keep items from getting old while stored. This is especially important if you work with any kind of perishables. In fact, in these instances, you should never store large amounts; simply make sure that your supply chain can replenish your stock with frequency, and check your stock daily for anything that is no longer usable. Cost Efficiency Finally, be aware of the costs of shipping and receiving, as well as the total net worth of the items you have in your inventory. It is essential to document all incoming and outgoing stock so that, in an inventory check, all information is accurate. Whether you are in charge of a very small division or an entire company, youll do well to understand the essentials of inventory management in order to profit rather than overextend the budget youre given.

Employing Effective Inventory Management In Your Workplace To employ effective inventory management in your workplace, you must start at the bottom and work your way up the ladder of techniques. The first thing to consider is how other employees who are involved in the stock and supply within the warehouse are currently handling the inventory for which you are now responsible.

Lack of knowledge on the part of employees is one major distraction when you are attempting to create effective inventory management systems within your department or supply house. There could be several problems to address in this circumstance. First of all, the prior manager may not have employed any kind of effective inventory management strategy, or perhaps if the individual did, there was simply no system passed on to the employees that was to be followed. Either way, you are in a position in which you must determine the next course of action. Most of the time, this will involve training the employees in effective inventory management techniques, including proper labeling and stocking of product, tracking system usage, and ordering strategies. Identifying the Problem Another problem may be that there is no current effective inventory management system in place. This leaves the responsibility to you to create such a system. You should start by identifying the existing problems with inventory management and addressing these. Is the stocking system organized, or is everything haphazardly thrown into the first open spot? Is stock being rotated, or is there old product sitting around wasting that is going to become a monetary issue when it has to be thrown out? Is everything labeled in a concise, legible manner so that all items can be located easily? All of these are aspects of effective inventory management that may not have been previously considered and should be worked into your new strategy. Reorganizing You may also need to go through the records of stock that has come and gone in recent months to determine if there are items in demand that are not being supported as necessary, as well as if there are things in the inventory that do not move well and could be eliminated or at least slowed in restocking efforts. Determining what products pull in the greatest revenue and have the greatest turnaround is a great way to employ effective inventory management strategies, allowing you to make room for best sellers while slowly removing items that dont sell well. When you have your cash cows determined, complete a system of stocking and product rotation that keeps items new and fresh, and train your employees to follow the system youve created, youll find effective inventory management simply becomes part of the daily grind and is no longer something you have to mull over every day. Your inventory checks will be concise and clear, with everything coming together appropriately, and your entire business will run more smoothly without snags. Using methods and techniques that have proven themselves in other businesses where inventory management is essential will make effective inventory management in your situation less of a problem.

Stores & Inventory Management Policy & suggestion

Control measures over stores and inventory management systems inclusive of fixing of inventory norms, adequacy of insurance cover On the Basis of ABC Classification Physical verification procedures of inventory including valuation and adjustments on account of physical count differences will be as under: A Class - 3 cycle in a Year B Class - 2 cycle in a Year C Class - once in a year Controls over issue, consumption and recording of high value items ABC classification to control inventory norms & Standard Ageing report is helpful to Generation of stock aging from the system will enable effective tracking of the stocks and may also be used for reporting as part of the stores and finished goods MIS. Moreover we recommend that the company requests the supplier to mention the date of manufacturer on the bags/containers.