Or

Intern ational I nstit ute Of Planning & Managemen t

Operation Research Inventory Control

1

introduction Inventory means all the materials, parts, supplies, equipments, tools and in process or finished products, recorded and kept in organization for some period time. Inventories are piles of raw materials and finished goods in warehouse.

2

Definition of inventory control Inventory control is a system of ordering based on the maintenance of stock in a store using a re-order rule based on stock levels. Inventory control is concerned with various items stocked at pre-determined level or within some safety limits.

3

Objective of inventory control Service to customer. Effective use of capital. Economy in purchasing. Continuity of productive operation.

4

Costs associated with inventories Set up cost Ordering cost Purchase cost Carrying cost Shortage cost Salvage cost Revenue cost

5

classification

2. 3. 4. 5. 6.

Classification of inventory according to functions is as follows, Transit Inventories. Cycle Inventories. Buffer Inventories. Decoupling Inventories. Inventory as per the nature of items

6

Types of inventory analysis. Different organizations follow different inventory analysis or inventory control system. Some of them are: 3. ABC 4. HML 5. VED 6. FSN. 7. SDE 8. XYZ 9. GOLF 10. SOS 7

ABC analysis It is based on the concept, “Thick on the best and Thin on the Rest.” The ABC approach is a means of categorizing inventory items into three classes ‘A’ , ‘B’ and ‘C’, according to the potential amount to be controlled. It is one of the widely used techniques of inventory control.

8

Hml analysis The HML classification follows the same procedure as is adopted in ABC classification. H = HIGH; M = MEDIUM; L = LOW.

Only difference is that in HML, the classification unit value is the criterion and not the annual consumption value. 9

Ved analysis VED Classification V= Vital; E= Essential; D= Desirable.

• If a part is vital it is given ‘V’ classification, if it •

is essential, then it is given ‘E’ classification and if it is not so essential, the part is given ‘D’ classification. For ‘V’ items, a large stock of inventory is generally maintained, while for ‘D’ items, minimum stock is enough.

10

Fsn analysis Here, classification is based on the pattern of issues from stores and is useful in controlling obsolescence. F = Fast moving S = Slow Moving; N = Non Moving.

11

Sde analysis This method is used to those items which are scarce in availability. • S = Scarce • D = Difficult • E = Easily

12

Xyz analysis It is based on closing inventory of different items. • X = Items with High Investment • Y = Items whose value is nor too high nor low • Z = Items with Low Investment

13

Golf analysis Items categorized based on the source of supply

14

Sos analysis Seasonal, Off seasonal items.

15

Concept of economic order quantity EOQ is the size of order which minimizes total cost of carrying inventories and cost of ordering. EOQ is the fixed quantity of materials for which the order is to be placed each time.

16

Graph Of eoq .

Annual Costs

Total Cost Carrying Cost

Ordering Cost

Quantity Q

17

Economic order quantity It is calculated by using a formula which takes into consideration the: • Annual demand for the item [R] • Cost of placing one order [S] • Cost of one unit of item [C] and • Number of units to be carried [I] Q = 2RS / IC

18

Problem related to eoq Problem of EOQ Simple.docx

Problem of EOQ.docx

19

Thank you

20