need sumthing abt inventary management as a theory

S

sadhana831

New member
hi
guys happy ganapati
i m need of theory on inventary management and also a case
a live eg to support it
plzzzz need it by tuesday
thnx
regards
sadhnana
 
hi sadhana......just a request......When you wish somebody Ganapati......try to be like it... it has sharp eyes...short mouth.....etc....the moral of the story...is please run a small search..on MP for inventry management......

well for theory....we have the following document....
 

Attachments

1) ABC ANALYSIS
ABC analysis underlines a very important principle “Vital few: trivial many”. Statistics reveal that just a handful of items account for bulk of the annual expenditure on materials. These few items, called ‘A’ items, therefore, hold the key to business. The other items, known as ‘B’ and ‘C’ items, are numerous in number but their contribution is less significant. ABC analysis thus tends to segregate all items into three categories: A, B, and C on the basis of their annual usage. The categorization so made enables one to pay the right amount of attention as merited by the items.
A-items: it is usually found the hardly 5-10% of the total items account for 70-75% of the total money spent on the materials. These items require detailed and rigid control and need to be stocked in smaller quantities. These items should be procured frequently, the quantity per occasion being small.
B-items: these items are generally 10-15% of the total items and represent 10-15% of the total expenditure on the materials. These are intermediate items. The control on these items need not be as detailed and as rigid as applied to C items.
C-items: these items are generally 70-80% of the total items and represent 5-10% of the total expenditure on the materials. The procurement policy of these items is exactly the reverse of A items. C items should be procured infrequently and in sufficient quantities. This enables the buyers to avail price discounts and reduce work load of the concerned departments.

Policies of Control for A, B and c Categories.
Any sound stock control system should ensure that the each item gets the right amount of attention at the right time. ABC analysis makes this possible with considerably less efforts due to its selective approach there are number of ways in which ABC classification can be made use of:

v Degree of Control
Some one at the senior level should be made responsible for regular reviewing of these items. Up-to-date and accurate records should be maintain for these items. “B” items should be brought under normal control made possible by goods record keeping and periodic attention. Little control is required for “C” items.

v Ordering Procedure
A items should be subject to frequent review to reduce unwarranted stockouts and possibilities of overstocking. A reasonable good analysis for order points is required for “B” items but the stocks may be reviewed less frequently. No such computations are necessary for “C” items. These should be bought in bulk.

v Staggering of delivery schedules
Staggering of delivery schedules is one of the best strategies to reduce the inventory investment and ensure un-interrupted inflow of materials. Staggered deliveries tend to reduce cost of order writing but increase the cost of inspection and receiving. Annual contract with scheduled deliveries are desirable for “A” and “B” class of items. “C” class of items, however, should be purchased in bulk on single-order-basis.

v Stock records
Details records of goods ordered, received, issued and goods on hand should be maintained for “A” category of items. No such detailed records are necessary for “C” items. Any routine method that ensures goods and accurate records is enough for “B” category of items.

v Priority treatment
VIP treatment may be accorded to A items in all activities such a processing of purchases orders, receiving, inspection movement on the shop floor, etc., with an object to reduce lead time and average inventory. No such treatment is necessary for “B” items. No priority is assigned to “C” items.

v Safety Stock
All items of consumption are equally important from production point of view. Safety stock should be less for “A” items. The possibility of stockouts can considerably be cut down by closer forecasting, frequent reviewing and more progressing. “C” items, on the contrary, should have sufficient safety stock to eliminate progressing and to reduce the probability of stockouts. A moderate policy is required for “B” items, safety stock being neither too high nor too low.

v Value Analysis
To secure maximum benefits, it is essential to select those items for value analysis which offer the highest scope for cost reduction. The usage classification is a useful step in this direction. Only “A” and “B” items are selected for detailed value analysis and the former is given priority over the latter. “C” items should not be value analyzed.
 
Inventory is one of the major current assets to the organization. They are important input of final product. It is an area where significant cost savings can be made. Inventory decisions are high risk and high impact from the perspective of financial operation. Inventory, as current asset, differs from other current assets because only financial managers are not involved. Rather, all the functional areas, finance, marketing, production, and purchasing are involved. The job of the financial manager is to reconcile the conflicting viewpoints of the various functional areas regarding the appropriate inventory levels in order to fulfill the overall objective of maximizing the owner’s wealth. Raw materials shortages can shutdown a manufacturing line or modify a production schedule, which, in turn introduces added expenses and potential for finished goods shortages. Just as shortages can disrupt planned marketing and manufacturing operations, over stocked inventories also create problems. Overstocks increases cost and reduce profitability through added warehousing, working capital requirements, deterioration, insurance, tax and obsolescence.
 
BENEFITS OF INVENTORY MANAGEMENT
 Reduced stocking costs resulting from efficient matching of requirements to stock.
 Re-order recommendations highlight urgent needs. Help prevent stock-outs.
 Instant access to 24 month usage pattern aids decision-making, reveals trends. Old data easily purged.
 Automatic capture on audit trail of all stock movement details helps resolve queries.
 Instant month-end valuation of receipts, issues, adjustments etc.
 Rapid stock and work-in-progress evaluation.
 True multi-location without constraints.
 Easy monitoring of slow moving stocks.
 Automation of inventory checking cycles ensures that items are not forgotten, improves accuracy.
 Automatic tracking of scrap rates and recalculation of safety levels reduces effort, improves control.
 ABC analysis system focuses attention on high value stock holdings.
 
CHARACTERISTICS

• The holding of inventory is risky because of the capital investment and the potential for obsolescence.

• Investments for inventory cannot be used to obtain other goods or assets that could improve enterprise performance.

• Funds supporting inventory investment must be borrowed, increasing the firm’s interest expense. A second form of risk is the possibility that the product will be pilfered or become obsolete.

These factors and the relative magnitude of assets that are inventory – related contribute substantially to the riskiness of most enterprises. It is important to understand that the nature and extent of risk vary depending on an enterprise’s position in the distribution channel.








INVENTORY TECHNIQUES
ABC ANALYSIS
ABC analysis underlines a very important principle “Vital few: trivial many”. Statistics reveal that only a handful of items account for bulk of the annual expenditure on materials. These few items called ‘A’ items therefore hold the key to business. The other items known as ‘B’ and ‘C’ items are numerous in number but their contribution is less significant. ABC analysis thus tends to segregate all items into three categories: A, B and C on the basis of their annual usage. The categorization so made enables one to pay the right amount of attention as merited by the items.
ABC CLASSIFICATION SYSTEM

A – Items: It is hardly found that 5-15% of items account for 70-80% of the total money spent on materials. These items require detailed and rigid control and need to be stocked in smaller quantities. These items should be procured regularly, the quantity per occasion being small. A healthy approach would be to enter into contract with the manufacturers of these items and have their supply in staggered lots according to production program of the buyer. This, however, will be possible when the demand is steady. Alternatively, the inventory can be kept at minimum by frequent ordering.
B – Items: These items are generally 30% of all items and represent 15% of the total expenditure on the materials. These are intermediate items. The control on these items need not be as detailed and as rigid as applied to C items.
C – Items: There are numerous (as many as 50–60% of the total items), inexpensive (represent hardly 5–10% of the total expenditure on materials) and hence insignificant (do not require close control) items. The procurement policy for these items is exactly the reverse of ‘A’ items. C items should be procured infrequently and in sufficient quantities. This enables buyer to avail price discounts and reduce workload of the concerned departments.
for better understanding refer this link
http://cgda.nic.in/rt/rtcblr/websit... Force/Stores Mgmt & Provisioning/tsld006.htm
 
Inventory is a list of goods and materials, or those goods and materials themselves, held available in stock by a business. Inventory are held in order to manage and hide from the customer the fact that manufacture/supply delay is longer than delivery delay, and also to ease the effect of imperfections in the manufacturing process that lower production efficiencies if production capacity stands idle for lack of materials.
Business inventory
The reasons for keeping stock
All these stock reasons can apply to any owner or product stage.
• Buffer stock is held in individual workstations against the possibility that the upstream workstation may be a little delayed in providing the next item for processing. Whilst some processes carry very large buffer stocks, Toyota moved to one (or a few items) and has now moved to eliminate this stock type.
• Safety stock is held against process or machine failure in the hope/belief that the failure can be repaired before the stock runs out. This type of stock can be eliminated by programmes like Total Productive Maintenance
• Overproduction is held because the forecast and the actual sales did not match. Making to order and JIT eliminates this stock type.
• Lot delay stock is held because a part of the process is designed to work on a batch basis whilst only processing items individually. Therefore each item of the lot must wait for the whole lot to be processed before moving to the next workstation. This can be eliminated by single piece working or a lot size of one.
• Demand fluctuation stock is held where production capacity is unable to flex with demand. Therefore a stock is built in times of lower utilisation to be supplied to customers when demand exceeds production capacity. This can be eliminated by increasing the flexibility and capacity of a production line or reduced by moving to item level load balancing.
• Line balance stock is held because different sub-processes in a line work at different rates. Therefore stock will accumulate after a fast sub-process or before a large lot size sub-process. Line balancing will eliminate this stock type.
• Changeover stock is held after a sub-process that has a long setup or change-over time. This stock is then used while that change-over is happening. This stock can be eliminated by tools like SMED.
These classifications apply along the whole Supply chain not just within a facility or plant.
Where these stocks contain the the same or similar items it is often the work practice to hold all these stocks mixed together before or after the sub-process to which they relate. This 'reduces' costs. Because they are mixed-up together there is no visual reminder to operators of the adjacent sub-processes or line management of the stock which is due to a particular cause and should be a particular individual's responsibility with inevitable consequences. Some plants have centralized stock holding across sub-processes which makes the situation even more acute.
Special terms used in dealing with inventory
• Stock Keeping Unit (SKU) is a unique combination of all the components that are assembled into the purchasable item. Therefore any change in the packaging or product is a new SKU. This level of detailled specification assists in managing inventory.
• Stockout means running out of the inventory of an SKU.[1]
• "New old stock" (sometimes abbreviated NOS) is a term used in business to refer to merchandise being offered for sale which was manufactured long ago but that has never been used. Such merchandise may not be produced any more, and the new old stock may represent the only market source of a particular item at the present time.
Inventory examples
While accountants often discuss inventory in terms of goods for sale, organizations - manufacturers, service-providers and not-for-profits - also have inventories (fixtures, furniture, supplies, ...) that they do not intend to sell. Manufacturers', distributors', and wholesalers' inventory tends to cluster in warehouses. Retailers' inventory may exist in a warehouse or in a shop or store accessible to customers. Inventories not intended for sale to customers or to clients may be held in any premises an organization uses. Stock is simply cash in disguise. If stocks are uncontrolled, you are encouraging theft. Moreover it will be impossible to know the actual level of stocks and therefore impossible to control them.
Manufacturing organizations usually divide their "goods for sale" inventory into:
• Raw Materials - materials and components scheduled for use in making a product.
• Work in Process, WIP - materials and components that have begun their transformation to finished goods.
• Finished goods - goods ready for sale to customers.
• Goods for resale.
For example:
Manufacturing
A canned food manufacturer's materials inventory includes the foods to be canned, empty cans and their lids (or coils of steel or aluminum for constructing those components), labels, and anything else (solder, glue, ...) that will form part of a finished can. The firm's work in process includes those materials from the time of release to the work floor until they become complete and ready for sale to wholesale or retail customers. Its finished good inventory consists of all the cans of food in its warehouse that it has manufactured and wishes to sell to food distributors (wholesalers), to grocery stores (retailers), and even perhaps to consumers through arrangements like factory stores and outlet centers.
Logistics or distribution
The logistics chain includes the owners (wholesalers and retailers), manufacturers' agents, and transportation channels that an item passes through between initial manufacture and final purchase by a consumer. At each stage, goods belong (as assets) to the seller until the buyer accepts them. Distribution includes four components:
1. Manufacturers' agents: Distributors who hold and transport a consignment of finished goods for manufacturers without ever owning it. Accountants refer to manufacturers' agents' inventory as "matériel" in order to differentiate it from goods for sale.
2. Transportation: The movement of goods between owners, or between locations of a given owner. The seller owns goods in transit until the buyer accepts them. Sellers or buyers may transport goods but most transportation providers act as the agent of the owner of the goods.
3. Wholesaling: Distributors who buy goods from manufacturers and other suppliers (farmers, fishermen, etc.) for re-sale work in the wholesale industry. A wholesaler's inventory consists of all the products in its warehouse that it has purchased from manufacturers or other suppliers. A produce-wholesaler (or distributor) may buy from distributors in other parts of the world or from local farmers. Food distributors wish to sell their inventory to grocery stores, other distributors, or possibly to consumers.
4. Retailing: A retailer's inventory of goods for sale consists of all the products on its shelves that it has purchased from manufacturers or wholesalers. The store attempts to sell its inventory (soup, bolts, sweaters, or other goods) to consumers.
 
hey can u hep me. i m doin my grand project on the topic- A study on issues in inventory management and its impact on the profitability of mega retail stores.

if any1 can help me plz do
thnz frenz
 
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