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Inventory in operation
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CASH
Marketing
SALES
Finance Operation
PROCESSING
Inventory
STOCK
Inventory management
It is a scientific process of monitoring and regulating the flow of inventory in operation management Materials management should ensure uninterrupted supply of materials to operation department
Classification of inventory
Manufacturing Inventory: Raw materials, components, sub-assemblies, work-in-process, finished goods Maintenance Repair & operation supplies inventory: Spares, consumables, fuel oil, lubricants etc. Miscellaneous inventory: stationery, scrap, obsolete items etc.
Exercise - 1
The annual demand of an item of inventory is 9000 units, priced at Rs. 8/per unit. The ordering cost is Rs. 40/- per order and inventory carrying cost is 25% of inventory value. Find EOQ; reordering level and nos. of order, if lead time is 10 days.
Exercise - 2
There is constant demand rate of an item. The annual demand is 6000 units and price is Rs. 60/- per unit. The ordering cost is Rs. 150/- and inventory carrying cost is 20% of average inventory. What is the optimal order quantity? If the supplier offers a discount of 1% for 1200 units order, should the discount be accepted?
100 90 60
C O N S U M P T I O N
Pareto analysis
C B
A 10 20 70 Number of items
Control process
Activity Group I Group II Group III Control Tight moderate loose Forecast Accurate estimate rough Quantity Exact exact estimated Reports Weekly monthly quarterly Follow up Maximum periodical exception
Codification of items
Enables Computerized operation Reduction in variety of items Prevents duplication of items Accurate identification of items Helps sorting of items Standardization of items Simplification of operation
11 12 13 14 15 16 17 18 19 20
Coding logic
Operation Code 1 plant or unit 2 equipment 3 common item 4 spares 5 material class 6 specifications 7 specifications 8 location 9 location 10 check digit Control Code 11 VED / ABC 12 XYZ / FSN 13 EOQ 14 ROL 15 price 16 preservation 17 handling 18 unit measure 19 a/c code 20 a/c code 6-9 > Bin number