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PRESENTATION ON INVENTORY
MANAGEMENT TECHNIQUE

PRESENTED BY:
APARAJITA BORGOHAIN(MBA, 07)
DAISY CHELLENG(M.COM, 03)
EMON KALYAN BHUYAN (MBA, 01)
ANIRBAN DUTTA (M.COM, 01)
 CONTENT

 INTRODUCTION
 NATURE OF INVENTORIES
 OBJECTIVES OF INVENTORY MANAGEMENT
 EFFECTIVE INVENTORY MANAGEMENT INVOLVES
 INVENTORY MANAGEMENT TECHNIQUE
 CONCLUSION
 INTRODUCTION

 Inventory refers to goods, items or material that held available in

stock for fulfilling future customers demand.
 Inventory management is the systematic process of ordering,
storing and using a company’s inventory such as raw materials,
finished goods and other essential components.
 Inventory management is an important aspect of the business
which the management cannot afford to ignore
 NATURE OF INVENTORIES

 Raw Materials – Basic inputs that are converted into finished

product through the manufacturing process.
 Work-In-Progress – Semi-Manufactured products need some
more works before they become finished goods for sale.
 Finished Goods – Completely manufactured products ready for
sale.
 Supplies – Office and plant cleaning materials not directly enter
production but are necessary for production process and do not
involve significant investment.
 OBJECTIVES

 To maintain a optimum size of inventory for efficient and smooth

production and sales operations.
 To maintain a minimum investment in inventories to maximize
the profitability.
 Effort should be made to place and order at the right time with
right source to acquire the right quantity at the right price and
right quality.
 EFFECTIVE INVENTORY
MANAGEMENT
An effective inventory management should :
 Ensure a continuous supply of raw materials to facilitate
uninterrupted production.
 Maintain sufficient stocks of raw materials in periods of short
supply and anticipate price changes.
 Maintain sufficient finished goods inventory for smooth sales
operation, and efficient customer service.
 Minimize the carrying cost and time.
 Control investment in inventories and keep it at an optimum
level.
 7 MOST EFFECTIVE
INVENTORY MANAGEMENT
TECHNIQUES
ABC Analysis

Just In Time Method

Materials Requirement Planning Method

Economic Order Quantity Model

Minimum Safety Stocks

VED Analysis

Fast, Slow and Non-Moving Method

ABC Analysis

 ABC analysis stands for Always Better Control Analysis.

 It is an inventory management technique where inventory items
are classified into 3 categories namely – A, B and C.
 The items in A category of inventory are closely controlled as it
consists of high price inventory.
 The items in B category are relatively lesser expensive inventory.
 The C category consists of high number of inventory of items that
are less expensive.
Just In Time Method [JIT]

 The company keeps only as much inventory as it needs during the

production process.
 The Company saves the cost of storage and insurance.
 This is a little risky method of inventory management.
 This method requires proper planning.
Materials Requirement Planning Method

 In this method the manufacturers order the inventory after

considering the sales forecast.
 MRP system integrates data from various areas of the business
where inventory exists. Based on the data and demand in the
market, the manager would carefully place the order for new
inventory with the material suppliers.
Economic Order Quantity Model

 This technique focuses on taking a decision regarding how much

quantity of inventory should the company order at any point of
time and when should they place the order.
 In this model, the store manager will reorder the inventory when
it reaches the minimum level.
 EOQ model helps to save the ordering cost and carrying costs
incurred while placing the order.
 With the EOQ model, the organization is able to place the right
quantity of inventory.
Minimum Safety Stocks

 The minimum safety stock is the level of inventory which an

organization maintains to avoid the stock-out situation.
 It is the level when we place the new order before the existing
inventory is over.
 Like for example, if the total inventory in an organization is
18,000 units, they place a new order when the inventory reaches
15,000 units. Therefore, the 3,000 units of inventory shall form
part of the minimum safety stock level.
VED Analysis

 VED stands for Vital Essential and Desirable.

 Organizations mainly use this technique for controlling spare
parts of inventory.
 Like, a higher level of inventory is required for vital parts that are
very costly and essential for production. Others are essential
spare parts, whose absence may slow down the production
process, hence it is necessary to maintain such inventory.
Similarly, an organization can maintain a low level of inventory
for desirable parts, which are not often required for production.
Fast, Slow and Non-Moving Method

 This method of inventory control is very useful for controlling

obsolescence.
 All the items of inventory are not used in the same order; some
are required frequently, while some are not required at all.
 This method classifies inventory into three categories, fast-
moving inventory, slow-moving inventory, and non-moving
inventory.
 The order for new inventory is placed based on the utilization of
inventory.
 CONCLUSION

Inventory management is an essential part of every business. With

an effective inventory management system in place, the business can
significantly reduce its various costs like warehousing cost,
inventory carrying cost, ordering cost, cost of obsolescence, etc. It
improves the supply chain of the business. Managers are able to
forecast the level of production at which they need to place new
orders for inventory. Hence, organizations should take all the
necessary steps to maintain an effective inventory management and
control system.