INVENTORY

MANAGEMENT

INTRODUCTION TO INVENTORY
MANAGEMENT

Inventory means any tangible property held

For sale in ordinary course of business
Processed to be sold
Used in production of gods and services for sale ,including
maintenance supplies and consumables

It involves creating balance between the Finance

managers point of view and that of production managers .
Finance manager opts for limited investment in stock
v/s
Production manager opts for excess stock maintenance to
avoid stock maintenance .

TYPES OF INVENTORY
RAW MATERIAL

OBJECTIVES OF INVENTORY MANAGEMENT

To have stocks available when required
To efficiently make use of storage space
To create balance between under stocking and
over stocking
To maintain accountability of inventory
To keep expenditure within budget
To decide on essential stocks and stock to
procure when demand arises
To avoid interruptions in operations
To centralise the authority to make purchase
orders
To reduce inventory carrying cost

FACTORS INFLUENCING
INVENTORY
1. Lead time : Time gap between identifying need for
inventory and actual receipt of goods.
2. Cost of holding inventory : Includes material cost,
ordering cost, carrying cost, cost of under stocking
and over stocking .
3. Re-order point : When stock available is less and
comment might face danger of interruption of
production process.
4. Stock : It is the safety or reserve stock maintained by
comment to meet uncertainties .
5. Variety reduction : Avoid stocking of less important
items out of wide variety of stock maintained .
6. Material planning : Pre-planning of expenditure with
regard to materials .

JUST-IN-TIME
In the recent past view towards holding inventory has
changed . The companys feel that holding inventory
results in blocked capital and high risk . Hence
concept of Just In Time was introduced .
It implies that , buying only required amount of
goods and at the required time only .
This reduce cost of carrying and cost of holding to
great extent .
This system is highly flexible in nature .
There is minimum planning required as goods are
acquired only when needed and this does not involve
any prior planning .