Introduction : Introduction Inventory management is the system devised and adopted for controlling investment in inventory. The aim of inventory management is to attain a healthy balance between the cost of having inventory and the cost of not having inventory. Bad management of inventory may lead to overstocking or stock outs.
Types of inventory : Types of inventory Direct inventories Raw material Work in Progress Finished goods Indirect inventories Transit or movement inventories Buffer inventories or safety stock Lot size inventories Seasonal inventories Fluctuation inventories Decoupling inventories
Objectives of Inventory Control : Objectives of Inventory Control Hedge against inflation Protection against fluctuation in demand Protection against fluctuation in supply To avoid stock outs and shortages Quantity discounts Optimum use of men, machines and materials Helps prevent wastage
Steps in inventory control : Steps in inventory control Formulation of policy Location of warehouses Determination of EOQ Determination of safety stock Determination of lead time
Types of inventory models : Types of inventory models Deterministic models – these are simple models in which it is assumed that the demand or consumption rate is known with certainity Constant lead time is involved in procurement Probabilistic models – here the demand follows a known probability distribution, while the lead time may either be constant or variable with a known probabilistic distributiuon Static models – static models relate to a single decision process in which only a single purchase order can be placed to meet the demands.Eg. Bread and eggs at a grocer Dynamic – the decision on one procurement process will affect the subsequent procurement decisions. Eg. A printer and its consumables
Types of inventory models : Types of inventory models EOQ Assumptions under this model The demand is known and is constant and occurs...