Inventory Management

Part-II

Inventory Management
EOQ Problem 1:
Let monthly demand at a retailer is 1000 units.

Fixed ordering costs are Rs 4000 per order. Item

cost is 500 per item. Inventory holding costs are
20%.
Determine:
1.Nos. of units in each replenishment lot.
2.Cycle inventory
3.Nos. of orders per year
4.Annual Inventory related costs (ordering and
inventory holding costs)
5.Average material flow time
4-2

Inventory Management
Annual demand, D = 1,000 x 12 = 12,000 units
Order cost per lot, Co = Rs 4,000
Unit cost of item, C = Rs500
Inventory holding cost per unit per year (as a
fraction of unit cost) Cc = 0.2 x 500 = Rs 100

Qopt = 2 Co D / Cc = 2 x 4000 x 12000 /

100
= 980 units
4-3

Inventory Management
Cycle Inventory = Qopt / 2 = 980/2 = 490
Nos. of orders per year = D / Qopt = 12000 /

980 = 12.24
Annual ordering and inventory holding costs

= (D / Qopt )x Co + (Qopt / 2 ) x Cc

= 12.24 x 4000 + 490 x 100 = Rs 97960

Average material flow time = Qopt / 2 D
= 980 / 2 x 12000 = .041 year = .49
months = 14.96 days
4-4

Inventory Management
Now if in the previous example, manager
wants to reduce the lot size to 200, then
what are the annual inventory related costs.
With Q=200
(D / Q )x Co + (Q / 2 ) x Cc = Rs 250,000. This lot size is
undesirable as total costs have increased.

What need to be done make the lot size

reduction optimal ?
Qopt = 200, D = 1000x12=12000, Cc = .2 x 500 = 100
Qopt = 2 Co D / Cc can be written as :
Co = Cc (Qopt)^2 / 2 x D = 166.7
Manager has to reduce the ordering cost from Rs 4000
to Rs 166.7 for the lot size of 200 to be optimal.
4-5

Inventory Management
EOQ Problem 2:
The epaint store stocks paint in its warehouse and

sells it online on its internet website. The store stocks

several brands of paint. However its biggest seller is
Sharman-Wilson Ironcoat paint. The company wants to
determine the optimal order size and total inventory
cost for Ironcoat paint given an estimated annual
demand of 10,000 gallons of paint, an annual carrying
cost of $ 0.75 per gallon and an ordering cost of $150
per order. Also determine the nos. of orders per annum
and time between orders (i.e. order cycle time) with
311 working days per year.
4-6

EOQ Problem 2
Cc = $0.75 per gallon
Qopt =
Qopt =

Co = $150

2CoD
Cc
2(150)(10,000)
(0.75)

Qopt = 2,000 gallons

Orders per year = D/Qopt
= 10,000/2,000
= 5 orders/year

TCmin =
TCmin =

D = 10,000 gallons
CoD
Q

CcQ
2

(150)(10,000)
2,000 +

(0.75)(2,000)
2

TCmin = $750 + $750 = $1,500

Order cycle time = 311 days/(D/Qopt)
= 311/5
= 62.2 store days
13-7

Inventory Management
Reorder Point:
Apart from the ordered quantity, decision maker also
need to specify point of time when to place the order.
This point of time is called Reorder Point.
As the daily demand is d and supplier has a lead
time of L days, the demand faced by retailer during
lead time is L x d units.
Therefore, retailer continuously monitors inventory
and when inventory level reaches L x d (the Reorder
point), retailer places a order of Qopt (i.e. EOQ).
4-8

Inventory Management
Insights from cycle stock inventory model

Larger the cycle inventory, longer the material flow time

which indicates longer time between

production and

sales. This in turn makes firm vulnerable to demand

changes in market place.

Also larger the cycle inventory, larger will be the firms

working capital requirement.

Also,

larger

inventory

shall

require

larger

space

requirements

Hence lower cycle inventory is always desirable.

E.g. Toyota

keeps cycle inventory of only few hours of

production.
4-9

Inventory Management
Insights from cycle stock inventory model
Larger retailers (i.e. higher demand) shall have in general

better inventory turn over ratio than smaller ones.

In case of stable demand, if retailer wants to improve

inventory

turnover

ratio,

ordering

costs

has

to

be

decreased.
For high value items (in comparision to small value

items), nos. of orders placed shall be more and lot sizes

shall be small.
4-10

Production Quantity Model

Problem:
Assume that epaint store has its own manufacturing

facility in which it produces ironcoat paint. The

ordering cost Co is the cost of setting up the
production process. Co = $150. Cc= $0.75 per gallon
and D=10,000 gallons per year. The manufacturing
facility operates for 311 days in a year, same as store.
Manufacturing facility produces 150 gallons per day.
Determine the optimal order size, total inventory cost,
length of time to receive an order, number of orders
per year and maximum inventory level.

4-11

Production Quantity Model

Problem (related to Problem 2)
Cc = $0.75 per gallon

Co = $150

d = 10,000/311 = 32.2 gallons per day

2CoD
Qopt =

d
Cc 1 p

D = 10,000 gallons
p = 150 gallons per day

2(150)(10,000)
=

32.2
0.75 1 150

= 2,256.8 gallons

CoD
CcQ
d
TC =
+
1 - p = $1,329
Q
2
2,256.8
Q
Production run =
=
= 15.05 days per order= Length
150
p
of time to receive an order
13-12

Production Quantity
Model
D
Number of production runs =
Q
= Nos. of orders per year

10,000
= 4.43 runs/year
2,256.8

Maximum inventory level = Q 1 -

= 2,256.8 1 -

= 1,772 gallons

13-13

Quantity Discounts
Quantity discounts: Price per unit decreases as

order quantity increases

In basic EOQ model, purchase price was not considered
as optimal order quantity / size remains same
irrespective of the purchase price.
However discount is associated with specific order size ,
different from optimal order size.
Manager need to consider tradeoff between
increased inventory related costs (specifically
higher carrying costs) in case of discount (on
account of bigger order size) versus total inventory
costs with EOQ (i.e. with optimal order size).
4-14

Quantity Discounts
Quantity discounts: Price per unit
decreases as order quantity increases
Total Inventory cost TC is now given
as
CD
CQ
o

TC =

Q +

+ PD

where
P = per unit price of the item
D = annual demand

13-15

Quantity Discount
Model
ORDER SIZE
0 - 99
100 199
200+

PRICE
$10 (original cost)
8 (d1)
6 (d2)

TC = ($10 )
TC (d1 = $8 )

Inventory cost ($)

TC (d2 = $6 )

Carrying cost

Ordering cost
Q(d1 ) = 100

Qopt

Q(d2 ) = 200
13-16

Quantity Discount Model

Problem:
Avtek, a distributor of audio and video equipment, wants to
reduce a large stock of televisions. It has offered a local chain of
stores a quantity discount pricing schedule as follows:

QUANTITY

PRICE

1 - 49
$1,400
50 - 89
1,100
The annual carrying
cost for the 900
stores for a TV is $190, ordering
90+

cost is $2500 and annual demand for this particular model TV is

estimated at 200 units. The chain wants to determine if it should
take advantage of this discount or order the basic EOQ order size.

4-17

Quantity Discount
QUANTITY

PRICE

1 - 49
50 - 89
90+

$1,400
1,100
900

Qopt =
For Q = 72.5
TC =
For Q = 90
TC =

2CoD
Cc
CoD
Qopt
CoD
Q

Co = $2,500
Cc = $190 per TV
D = 200 TVs per year
2(2500)(200)
= 72.5 TVs
190
CcQopt
+ PD = $233,784
2
CcQ
2

+ PD = $194,105
13-18

Inventory Management
Safety Inventory :

Cycle

Safety Inventory model assumed that

there is no uncertainty in demand and supply.

Actual Demand may differ from the forecasted

demand for a given period due to demand

fluctuations or forecast errors Demand
Uncertainty

Also, supplier lead time may be uncertain

Supply Uncertainty
4-19

Inventory Management

The uncertainty in demand or supply may lead to

a stockout situation.

To take care of stockout situations, firms carry

safety inventory

4-20

Safety Inventory is the average inventory in hand

when the replenishment lot arrives.
R= reorder point

Inventory

Average
Inventory

Cycle Inventory
Safety Inventory
Time

Average inventory carried by the firm is the

average
inventory.

cycle

inventory

plus

safety

Inventory Management
Tradeoff - Increases safety inventory improves
product

availability

but

it

also

increases

inventory carrying costs of the firm.

In todays business environment, a firm faces:
a.Increased product variety
b.Pressure to improve product availability
c.Shorter product life cycle
a and b pushes a firm to increase safety inventory
whereas c pushes it to decrease safety inventory.
4-23

Inventory Management
Level

of Safety
capturing :

inventory

is

decided

by

1. Uncertainty in demand
2. Uncertainty in supply

for a given Target service level

4-24

Inventory Management
Capturing Uncertainty:
Uncertainty in demand is captured using demand
distribution.
In real life situations, demand can be assumed to

follow a normal distribution.

Uncertainty

is
measured
using:
Standard
deviation , Coefficient of variation, Range.

Standard

deviation

is

most

widely

used

measure.
4-25

Inventory Management
Coefficient of Variation = Standard deviation / Mean
Standard Deviation alone do not capture uncertainty
Slow moving items typically have higher uncertainty and higher

CV while fast moving items have lower uncertainty and lower

CV.
For a new item or new supplier where past data is not available,

a subjective assessment of standard deviation can be made as :

Standard Deviation =
Range (i.e optimistic estimate pessimistic estimate)/ 6

4-26

Inventory Management
Demand distribution is characterized by mean demand

and standard deviation of demand.

Let d1, d2, d3, d4.. dn

be the demand observed for

n days.
Mean or average demand = d=(d1 + d2+ d3+ d4 . dn )/
n
Standard deviation of daily demand = d
= ((d1 - d)^2 + (d2 - d)^2 + .(dn - d)^2) / n
Similarly for supply uncertainty, mean lead time

be L and standard deviation of lead time is L

4-27

Referring to the model, there is no possibility of stockout between the point

the replenishment arrives and reorder point.
Firm is exposed to stockout only after placement of order and arrival of
replenishment i.e. during the lead time.

Inventory Management

Let LTD denotes the mean value of the total lead

time demand and Lead Time Demand

deviation of lead time demand.

is the standard

Uncertainty during the lead time is because

of uncertainty in actual
uncertainty is supply.

demand

and/or

4-29

Inventory Management
Value of LTD and Lead Time Demand can be calculated

from lead time demand distribution, if it is available

from historical data.
Or by using the formulas as:
(L= Average Lead time, d = Average Daily Demand)
LTD = L x d

Lead Time Demand = L d2 + d2 L2

4-30

Inventory Management
Safety Stock = K x Lead Time Demand

Here K is the Safety Factor= Nos. of standard

deviation corresponding to service level probability.
K indicates product availability.
Safety Stock = K d L

if L

is zero

Reorder Point (when to place the order)=

LTD + Safety Stock = LTD + K Lead Time Demand

4-31

Inventory Management

istribution of Demand During Lead Time

Probability of
Stockout

LTD = d L

Safety Stock

Reorder Point For a Service

Level
Probability of
meeting demand during
lead time = service level

Probability of
a stockout
Safety stock
Kd L
dL
Demand

13-33

Inventory Management

Daily Demand d, Mean d = 100 , d = 30

Supplier Performance
Mean lead time = L= 15 Days , L = 5
LTD = 100 x 15=1500
Lead Time Demand = 513
Now,
Safety Stock = K x Lead Time Demand
For a 95% service level, K = 1.65
Safety Stock = 846
Reorder Point = 1500 +846 = 2346

Inventory Management
There exists a relationship between service level and

K. Given the desired service level, value of K can be

determined or vice versa
(
Using
excel
function
:Service
level
=
NORM.DIST(K,0,1,1) or K = NORM.INV (s/100, 0,1); or K
= NORMSINV(s); Alternatively z table can be used.
In the present problem, if K=1 then Service

Level = 84.1%, then Safety stock = 513 units.

It means with this safety stock chances of stockout in a

replenishment cycle are 15.9 percent only (100-84.1).

4-36

Impact of Service Level On Safety Stock

Measuring Product Availability

Cycle service level (CSL)

Fraction of replenishment cycles that end with all

customer demand being met.

It is the probability of not having stockout in a

replenishment cycle

Product fill rate (fr) : Fraction of product demand

satisfied from product in inventory

Order fill rate: Fraction of orders filled from available

inventory

Safety Stock For Variable Demand but no

supply uncertainty
Illustration - 2

Copyright 2011 John Wiley & Sons, Inc.

13-39

Inventory Control
Systems
Continuous system (fixed-order-quantity)

Constant amount ordered when inventory declines to

predetermined level
Inventory is not tracked continuously
Time between orders is not fixed
Order quantity is fixed

Periodic system (fixed-time-period)

Order placed for variable amount after fixed passage of
time
Order is placed to raise the inventory to prespecified
threshold.
Inventory is not tracked continuously
Time between orders is fixed
Order quantity is not fixed
13-40

Inventory Management
Impact of Supply Chain Redesign on Inventory: Impact
of Aggregation : Centralisation vs Decentralisation
Any supply chain redesign has a significant impact on costs
especially inventory and transportation costs.
With centralization, firm will be able to reduce inventory
related costs but will increase its transportation cost to
maintain same service level.
Supply chain managers need to justify the same with
rigorous cost benefit analysis by taking into account
inventory related costs and transportation costs.
4-41

Impact of Aggregation on
Safety Inventory
Aggregation

and

safety

inventories

in

Centralisation
Di:

Mean weekly demand in region i, i = 1,, k

i:

Standard deviation of weekly demand in region i, i = 1,

, k

ij:

D C Correlation

of weekly demand for regions i, j,

C
1 i
jk
D
k
k
: Demand
faced
by
Central
location
C
C
2

2 ;

: Standard Deviation of weekly demand for central

D Di ;
i1

location

var D

i1

DC var DC

ij

i j

Inventory Management
Centralization vs Decentralization
Illustration:
Let us consider the case of a company that currently has 16
regional stock points/warehouses and serves its dealers
from the closest stock point.
The supply chain manager is exploring the option of
centralising its inventory.
Let each region have similar demand distribution with
mean daily demand=d= 100 and standard deviation = 30.
Demand of different regions in independent
Each stock point/ warehouse in both centralisation and
decentralization gets served by plant with lead time of
exactly 15 days.

4-43

Inventory Management
Average transportation cost in decentralization case is

Rs 1 / unit and in centralization case increases by 10%

i.e. Rs 1.1 / unit.
Ordering Cost = Co (or S) = Rs 256 / order
Inventory holding cost per unit per year = Cc = Rs 6
Required service level = 97.7% (K=2)
Working days per year = 300

4-44

Inventory Management
Cycle Inventory:
Centralized case

D = 16 x 100 x 300; Qopt = 6400,

Hence Cycle Inventory = 6400/2 = 3200
Decentralized case
D for each Stock point in decentralized case =

100 x 300; Qopt = 1600, Hence Cycle Inventory =

1600/2 = 800
4-45

Inventory Management
Safety Inventory:
Demand faced by centralized stock point:
d = d1 +d2 + d3dn
D = d12 + d22 + d32 . dn2
The phenomenon is called Risk Pooling
which suggests that demand uncertainty is reduced
when demand across demand locations is pooled.
It happens because higher demand in one loaction
offsets lower demand in another location.
Lower demand uncertainty leads to lower safety
stock in the centralized case.
4-46

Inventory Management
Safety Stock:
In case of centralisation

D = 302 x 16 = 120
Safety stock

= K D L = 2 x 120 x 15 = 3600

In case of Decentralisation

For each regional stock point,

d= 30, K=2, Safety stock

= K d L = 2 x 30 x 15 = 232

For all 16 locations, Safety Inventory = 16 x 232

4-47

Inventory Management
Decentralised
stock points

system

16

Centralised
stock point

Cycle stock/stock point =

Qopt / 2

800

3200

Safety Stock per stock point

232

928

Total Inv. in units for the

system

(232+800) 16
= 16512

928+3200
= 4128

Total Inv. carrying cost

16512 6
= 99072

4128 6
= 24768

Incremental
cost

Transportation

system

300100160.1
=48,000

Option of centralising the inventory should be

chosen

4-48

Inventory Management
Note:
Safety stock decreases due to risk pooling and
lower demand uncertainty faced by centralised
location.
Cycle stock in centralized case reduces because of

economies of scale.
If in this case, transportation costs say increases by

say 25% , then centralisation will not be benificial

4-49

Impact of Aggregation on
Safety Inventory
The Square-Root Law

Inventory Management
Centralisation vs Decentralisation:
i. Higher the demand uncertainty of the product, higher

will be the savings in safety stock when moving from

decentralisation to centralisation.
ii. For fast moving products like salt, wheat with low

demand uncertainty and high

centralisation is not beneficial.

transportation

cost,

iii.For slow moving products with high demand uncertainty,

it is better to centralise.
iv.Higher the nos. regional stock points, higher will be the

savings in cycle inventory in case of centralization

because of economies of scale.
4-51

Inventory Management

Two possible disadvantages to aggregation

Increase in response time to customer order

Increase in transportation cost to customer

Inventory Management
Managerial Levers to Reduce safety Stock:
1.Reduction in Demand Uncertainty:

This can be achieved with better forecasting or entering

into contracts with some customers with assured stable
demand.
2. Reduction in Supplier Lead Time: This can be achieved
by working with supplier and by using faster mode of
transport.
3. Reduction in supply uncertainty: This can be achieved
using more reliable modes of transport and working with
supplier.
4-53

Inventory Management
Managing Seasonal Inventory:
A firm that faces seasonal variation in demand

can follow either of the two basic approaches:

Chase Option: Produce as per demand in each
season and carry no seasonal inventory. During
peak season demand can be met by either hiring
more labour, running overtime, outsourcing etc.
Level Option: Produce at the same level through
out the year and build inventory during lean
season and use this inventory to take care of
excess demand during the peak season.
4-54

Inventory Management
Illustration:
A toy manufacturer faces demand for toys as given.
Inventory carrying cost per unit per quarter is Rs3.
Each worker can produce 500 units of toys per quarter.
Each temporary worker hired during the peak demand
quarter (Q4) will result in additional cost of Rs 6000.
Manufacturer needs to decide whether to pursue
chase or level option to meet demand.
Relevant costs to be considered are the incremental

costs of hiring in chase option and inventory carrying

costs in case of level option.
4-55

Inventory Management
Illustration: Managing Seasonal
Q1StockQ2
Q3
Q4
Demand

8000

8000

8000

12000

Production

9000

9000

9000

9000

Hiring Cost

Inv. C. Cst

3000

6000

9000

Production

8000

8000

8000

12000

Hiring Cost

48000

Inv. C. Cst

Level option

Chase option

Cost: level option= 18,000 Chase option= 48000

Inventory Management
Short lifecycle products:
1.
2.

3.
4.
5.

Selling season is small.

Either physical deterioration (perishable
goods) or perceived value (style goods)
decreases after selling season.
One does not have opportunity of
replenishment during selling season.
Sales should be anticipated before selling
season and requisite stock carried.
E.g. fashion products, bread, newspaper
4-57

Inventory Management
Optimum Order size for short life cycle
products
Cu = Cost of understocking
Co = Cost of Overstocking
Optimal service level = (Cu x 100) / (Cu + Co)
Optimal order size = Mean Demand + K x
standard deviation of demand
K = Service factor
Cost of understocking is an opportunity loss by the
firm for each unit of lost sales.
The cost of overstocking is the loss incurred by a
firm for each unit at the end of the selling season.
4-58

Inventory Management
Illustration: Optimum Order for a New Music
CD
CD purchase price = Rs. 200
CD sales price = Rs. 300
CD sales price after first weeks = Rs. 62.
Demand: Average 100 and Standard Deviation 30
Find optimum order quantity.
If manufacturer offers buyback scheme

with
cost of administering return- Rs. 53, what would
be the decision?

Inventory Management
With Cu = 100, Co = 138
Optimum service level = .42 = 42 %
Corresponding K = -0.2
Optimum order size = 100 0.2 x 30 = 94
In case of buyback:
Cu = 100, Co = 53
Optimum service level = .655 = 65.5 %
Corresponding K = 0.4
Optimum order size = 100 + 0.4 x 30 = 112
4-60

Inventory Management
Multiple item, Multiple location Inventory
Management:
1. Managing inventory in actual supply chain involves

dealing a large number of items often stocked at

multiple stock points at various stages in the
supply chain.
2. Inventory management need to be carried out at

each of these stock points and integrated with the

rest of the supply chain.

Inventory Management
For

multiple items, theoretically inventory

management and supply chain analysis is to be
carried out for each and every items.

Since nos. of items are in general large

and have varying importance, managers

divide items into multiple categories and
handle different categories in different
ways.
There are several classification schemes for

categorizing items or SKU

4-62

Inventory Management
1. ABC Classification:
Items are classified on the basis of sales on value terms.
A = very Important
B = Moderate Important
C = Little Important
ABC analysis is used for a) allocation of management time b)
Improvement Efforts c) Setting up service levels d) Stocking
decisions e.g. A category items at regional distribution
points, C category items at central warehouse, B category
at few regional locations

4-63

ABC Classification
Class A
5 15 % of units
70 80 % of

value

Class B
30 % of units
15 % of value

Class C
50 60 % of units
5 10 % of value
13-64

ABC Classification
Illustration:
The maintenance department for a small
manufacturing firm has responsibility for
maintaining an inventory of spare parts for the
machinery it services. The parts inventory, unit
cost, annual usage are given in following table.
The department manager wants to classify the
inventory parts according to the ABC system to
determine which stocks of parts should be
closely monitored.
4-65

ABC ClassificationIllustration
PART
UNIT COST ANNUAL USAGE/Demand
1
2
3
4
5
6
7
8
9
10

$ 60
350
30
80
30
20
10
320
510
20

90
40
130
60
100
180
170
50
60
120

13-66

ABC Classification
PART

9
8
2
1
4
3
6
5
10
7

TOTAL
VALUE

$30,600
16,000
14,000
5,400
4,800
3,900
3,600
3,000
2,400
1,700
$85,400

% OF TOTAL
VALUE

35.9
18.7
16.4
6.3
5.6
4.6
4.2
3.5
2.8
2.0

% OF TOTAL
QUANTITY % CUMMULATIVE

6.0
5.0
4.0
9.0
6.0
10.0
18.0
13.0
12.0
17.0

A
B
C

6.0
11.0
15.0
24.0
30.0
40.0
58.0
71.0
83.0
100.0

13-67

ABC Classification
CLASS
A
B
C

ITEMS
9, 8, 2
1, 4, 3
6, 5, 10, 7

% OF TOTAL
VALUE
71.0
16.5
12.5

% OF TOTAL
QUANTITY
15.0
25.0
60.0

Example 10.1
13-68

Inventory Management
2. FSN classification
Items are classified as Fast moving , slow
moving and non-moving.
Slow moving items are stored centrally and
fast moving items are stocked de-centrally.
Non-moving items are candidates for disposal.
This type of classification is popular in retail
industry.

4-69

Inventory Management
3. VED Classification:
Items are classified on criticality:
Vital = V, Essential = E , Desirable = D
This type of classification is popular in
maintenance management.
One can fix different service levels for
different items.

4-70

Two Forms of Demand

Dependent
Demand for items used to produce final

products
Tires for autos are a dependent demand item

Independent
Demand for items used by external

customers
Cars, appliances, computers, and houses are
examples of independent demand inventory

13-71

Inventory Management
Decoupling Inventory:

Entire supply chain is usually divided into multiple stages with

multiple decision makers.

Decision making units can be both at both organisational and

departmental level.

At organisational and departmental boundaries large

inventories can be held.

The decoupling inventory provides the flexibility needed by each

decision making unit to manage its operations independently
and to optimise its performance.

Improved coordination among stages can reduce decoupling

inventory significantly.

4-72

Inventory Management
Pipeline Inventory:

Also called in-transit inventory.

It consists of materials actually being worked on (workin-process inventory) or being moved from one location
to another in the chain (on transit inventory).

Pipeline

inventory

of

an

item

between

two

adjacent locations is the product of the process

time or transport time and usage rate of an item

Pipeline inventory may be reduced by using faster rater

of transporting or by reducing manufacturing lead
time.
4-73

Inventory Management
Illustration :
LT -Shipment by air = 7 days
LT- Shipment by sea = 45 days
Average demand = 100/day
Pipeline Inventory ( Shipment by air) = 700 units
Pipeline Inventory ( Shipment by Sea = 4500
units

Inventory Management
Dead Inventory or Stock:
Dead Stock refers to that part of non-moving
inventory that is unlikely to be of any further use
in supply chain operations or markets.
Dead Stock, essentially includes items that have
become obsolete because of changes in customer
preferences, design, production processes.
Unfortunately, in many firms dead stock is
allowed to accumulate as disposal of dead stock
show up in balance sheets as financial loss.
Rather it is wrongly shown as assets.
Firms should carefully monitor dead stock and find
means to reduce it.
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