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Abhishek Bose Anirudh Tiwari

Gautam Raj Prasad E. Prabhu
Shashank M.A.
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Õ mnventory consists of
Õ Raw materials
Õ Work in progress
Õ Finished goods
Õ mnventory in transit

  

 

a) Benefits in production
b) Benefits in purchase
c) Benefits in sales
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Õ To provide adequate inventory for the firmǯs requirement in

the process of work

Õ To minimize firmǯs investment in inventory

Õ To ensure smooth flow of materials in production & sales

operations
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Methods of Inventory Management

Õ Economic Order Quantity

  


Õ The firm can forecast accurately its annual requirement

Õ Usage of inventory is steady
Õ There is no time gap between ordering & the supply of
inventory
Õ Only two types of costs are considered: ordering cost &
inventory carrying cost
Õ Both costs are constant for the given inventory level
›  



TC = P*D + (D*S)/Q + (H*Q)/2

Q = Ϙ(2*D*S)/H

where,
TC = total cost
P = purchase cost per unit
D = annual demand of the raw material
S = fixed cost per order
H = annual holding cost
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a) Accurate forecast of annual requirement difficult.

b) No time gap between ordering & supplying of raw materials
assumed, which may not be the case.
c) Demand for a product may not be uniform throughout the year.
d) EOQ of manufacturing firm may not be economical for the
supplier.
e) Better discounts may be offered by the supplier for placing
orders higher than EOQ.
Yther methods of Inventory Management

Õ ÿ
 
ÿ
Õ ABC analysis
Õ High, Medium, Low (HML) classifications
Õ Vital, Essential, Desirable (VED) Classifications
Õ Scarce, Difficulty, Easy (SDE) Classifications
Õ Fast moving, Slow moving, Non moving (FSN) Analysis
Õ Seasonal & Off Seasonal (SOS) Analysis
Õ XYZ Analysis
Õ Government, Open market, Local & Foreign source
(GOLF) Analysis
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6
 
 
9raph Showing Consumption & Stock of
Raw Materials

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"ork In Progress ("IP)
Õ Product line of TATA STEEL includes long tubes,semis,hot
rods, cold rods and galvanized tubes.
Õ Tubes division uses Just Ȃmn-Time purchase system .
Õ A look at the chart indicates though in the last four years
sales has remained same or decreased , the stock of raw
material has increased. This is due to the fact that price of
raw material has increased but company is not able to
increase the price due to stiff competition. mncrease in
inventory may also be due to wrong estimation of orders.
Õ The chart of WmP shows that both cost of goods produced
and WmP have increased during the period. work in
progress holding period also has gone up which the
company must look into.
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