Professional Documents
Culture Documents
-: Management :-
Properly maintaining
adequate stocks to
ensure uninterrupted
service
Inventory Management
Involves..
What and how much stock you have
When to order fresh supplies
What and how much has been
ordered, when it was ordered
Where all supplies are stored
When and how much fresh stock was
received, and by whom
Why ?
Inventories Management
To Improve customer service
Economies of purchasing
To continuous Supply of material.
Transportation savings
Hedge against future
To avoid both over-stocking and under-
stocking of inventory.
To maintain independence of supply chain
Inventory Supply Chain
Raw
Materials
Works
in
Process
Finished
Goods
Finished
Goods in
Field
Inventory Costs
Carrying cost
cost of holding an item in inventory
Ordering cost
cost of replenishing inventory
Shortage cost
temporary or permanent loss of sales
when demand cannot be met
Cost Model
Annual
Total Cost
cost ($)
Slope = 0
CcQ
Minimum Carrying Cost =
2
total cost
CoD
Ordering Cost =
Q
100 —
Class A
90 —
80 —
Percentage of dollar value
70 —
60 —
50 —
40 —
30 —
20 —
10 —
0—
10 20 30 40 50 60 70 80 90 100
Percentage of items
FIFO Method
It assumes earliest goods purchased
are
the first to be sold
LIFO Method
It assumes latest goods purchased
are
the first to be sold
Problems in
Inventory Management
When to place an order
How much to order
Where to store Stock
storage and holding cost
Risk deterioration in quality
Risk of obsolescence
Risk of price decline
Key Messages..