Inventory System

A Conceptual Analysis

Abhinav Goel Dr. Suraksha Bansal

Lecturer Sr.Lecturer
DIMS, MEERUT DIMS, MEERUT
INDIA INDIA

Inventory is an essential part of business life. An inventory

model is considered with two decisions. First how much to
order at one time and second when to order, so that the
total inventory cost may be minimized. The first requirement
to inventory is to receive exact quantity of stock at exact time
of requirement.

A detailed list of movable articles or items which used in the

progress of an organization having economic value is called
inventory.
In other words inventory can be broadly defined as a stock of
goods which are stolled for a specific given period for future
production in a factory. The stocked item can be considered well
for the future production planning if they are listed through the
same process and it will enhance the economic value of an
organization. A certain amount of inventory is essential for
smooth running of an organization.
In manufacturing or process industry if the critical row
material is not available then it may cause to close the plant or
industry. In case of public utilities such as thermal power
generation will be reversely affected unless there is adequate
stock of coal to run a business industry, shop, and factory etc.
there is an essential need of having sufficient inventory. Without
sufficient inventory any business can not be survive in the
market. The major objective of inventory is that to get maximum
customer satisfaction in minimum cost on material. To get an
optimal solution of the problem we have to require a scientific
approach under given investment and to earn maximum profit in
minimum cost. Study of such type operation is called inventory
control.
There are some major objectives to run a smooth operation
of a production system and for getting an optimal solution of
these objectives, there is a requirement of a scientific approach
so study of such type of operations are called inventory control.
Centuries ago inventories did not require a scientific
management and also considered as a majorment of business
failure but presently fast turn over has become the main goal to
be pursued for more profit and less risk. That is today
inventory management technique become a necessary
evil for business whether it is manufacturing unit, transportation
unit, medical fields or retail chains as big bajar, v-mart, flu,
aapka bajar etc. however in the daily routine we also use
inventory managements techniques whether we know about it
or not.
Inventory is an essential part of business life. An inventory
model is considered with two decisions. First how much to
order at one time and second when to order, so that the
total inventory cost may be minimized. The first requirement to
inventory is to receive exact quantity of stock at exact time of
requirement.
To get maximum costumer satisfaction we have to provide
satisfactory service through supplier, factory and retailer, the
most of the requirement we shall maintain more stable
operation or work level.
Inventory has some objectives to achieve the organization
goals and to earn maximum profit as inventory deal with
controlling and the financial condition and the consumption of
the material should be minimum.
 Another object of inventory is to be obtaining an optimum
balance between the last due to non availability of an item and
cost of carrying stocks of product. To ensure about the non
avability of an item is the important object of inventory to
reduce the production cost in an organization.
To study of row material components stages of
manufacturing, inventory can be classified into different ways
like production inventory, work in process inventory, finished
good inventory, maintenance, and repair and operating
inventory. These inventories are helpful to study of row material
stages of manufacturing in a factory, stocked item and sold item
etc .These inventories also have a record of repairing and
production process. Inventories are also needed to provide the
economic and efficient operation in an organization for
expanding lot size which is adopted to obtain quantity discount,
reduced transportation and cost an minimize handling and
receiving costs ,anticipation stocks for periodic change in
demand. Inventory is also required to ensure ready supplies to
the consumers and is also needed to prevent the risk of
breakdown of production.
To study of economic parameters of an organizations
inventory has been considered in different costs.
(A) Storage cost which represents the cost of carrying
inventory stocks.
(B) Shortage cost which represents the shortage in row
material or sphere parts affected in the market.
(C) Ordering cost that starts with the requisition sent to the
purchased order and of following it up.
(D)Setup cost which includes the fixed cost associated
with obtaining the goods by manufacturing.
With the help of these costs we find the economic status of
an organization which is very important for the production
process and to achieve the organization goals.
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