Meaning of Inventory Types of inventory Importance of the inventory Meaning of Inventory Control Importance of inventory Control Procedure for

setting up an efficient inventory control system Techniques of inventory control

Inventory refers raw materials, spare parts, semi finished goods and finished goods which are recorded in the books by an enterprise in terms of their quantity and value and kept in its stocks, ware houses and plant for some period of time for future production.

Direct Inventories 1. Raw material 2. Semi finished good 3. Finished goods 4. spare parts Indirect Inventories

1. 2. 3. 4. 5. 6.

To ensure smooth production To provide quick customer service To facilitate production during lead time To facilitate a reasonable utilization of labour and equipment To enjoy the economies of large scale buying To enable efficient and economic operations

.It is the technique of maintaining the size of the inventory at some desired level keeping in view the best economic interests of an organisation. It is the process whereby investment in materials and parts carried in stock is regulated within predetermined limits set in accordance with inventory policy established by the management. B. Casson

It avoids delays in production It eliminates over stoc

classification and codification of inventory maintenance of inventory records control of the cyclic flow of materials control of tools store room management

Mnemonic Method Simple Numeric Method Numeric Method Combined Method

Periodic Inventory system Perpetual Inventory system 1. Bin Cards 2. Stores Ledger 3. Adoption of continuous stock taking a) Avoidable causes b) Unavoidable causes

1. 2. 3. 4. 5. 6.

Quick valuation of closing stock Lesser investment in materials Helpful in formulating proper purchase policies Immediate detection of theft and leakages etc Adequacy of working capital Beneficial in ascertaining efficiency of stores organisation

The steps of material- control cycle 1. Stores-record clerks make out purchase requisitions ----- and send to purchasing office 2. Purchasing office place the order to vendor and follow up the deliveries 3. The receiving department unloads incoming items and check the order against the purchase order (quantity and conditions) 4. The purchasing office audits the invoices 5. Handling man carry this material to stores and store clerks make the entries 6. Store clerk issue the material to different dept. on the basis of requisition (on the basis of production order planned by planning office ) again make the entries

7. Then send a record of material issued to the accounting office for cost accounting purpose. 8. Plant control boards in the planning office control the flow of goods in process by means of route sheet and move orders which direct the work and finally show the progress of work in the plant. 9. Dispatchers return unused material and parts to the stock room, Again clerks make the entries everywhere on the basis of Stores return Slip. 10. Dispatchers direct the movement of finished goods to store rooms and on the basis of work completed forms received from the plant . Again make the entries in finished goods record.

Holding tools Forming and cutting tools Measuring tools Auxiliary tools

Selecting the appropriate location for storage. Selecting an effective arrangement for stores Developing an efficient layout Selecting proper storage facilities Achieving systematic store room operations

setting up of various stock levels Preparations of Inventory budgets Maintaining perpetual inventory system Establishing proper purchase procedure Inventory turnover ratio ABC analysis VED analysis

Re-ordering level Maximum Level Minimum Level Average Stock Level Danger level Economic order Quantity

 Sales Budget Production Plan Purchase Budget Material Procurement Budget Controlling

 Purchase Requisition Inviting Quotations Schedule of Quotations Approving

the supplier Purchase order

Cost of goods consumed or sold during the period/ Average inventory held during the period
Slow moving Inventories Dormant Inventories Obsolete Inventories Fast Moving Inventories

ITEM

% of total store items

% of the total store value

Control

A
B C

10-20
20-30 70-80

50
30 20

Of greater degree
Reasonable degree Routine type of care

VED analysis SDE analysis FSN analysis XYZ analysis