Definition AND Concept of Inventory :

a.Idle Resources (Currently not in use):

b.Goods and Materials

b. Goods & Materials held available in the

stock by a business

c. Finance Term : Blocked Working capital

If Inventory blocks working capital ,

WHY TO CARRY INVENTORY / STOCK ??

Need of Inventory :
a. Market demand / supply fluctuations.
b. Production and Purchase lead time
c. Seasonal availability of materials
d. Suppliers minimum order quantity
e. Quantity discount / cost benefit
f. Logistics cost saving ( LCL vs. FCL)
g. Avoid loss of sale
h. To avoid stock out situation / loss of
Productivity
Types of Inventory :
a. Raw Materials.
b. WIP – Work in progress materials
c. Bought out parts
d. Finish products
e. Machinery spares & Tools
f. Consumables : Indirect materials
g. Stationary
h. Spare parts of finish Products
Types of Inventory by demand dependency :

a. Independent demand products

b. Dependent demand products

e.g. Car vs Spare Parts

Raw engine casting vs Finished engine
Furniture vs parts
Vacuum cleaner vs Hose
Why Inventory control ????? Because too
much inventory
a. Blockage of funds
b. Increases Inventory carrying cost
c. Reduces space productivity
e. More no. of damages
f. More time for stock counting and Mistakes
in records keeping
e. Chances of quality deterioration during
storage is more
Definition of Inventory management
Inventory Management system provides
information to efficiently manage the flow of
materials , effectively utilize people and
equipment , coordinate internal activities and
communicate with customers . Inventory
Management does not make decisions or
manage operations, they provide the
information to managers who make more
accurate and timely decisions to manage their
operations.
Scope of Inventory management / control
function
a. Computerization
b. Cycle counts and resolving stock discrepancies
c. Providing accurate / on line stock status within the
supply chain
d. Maintaining time discipline in data entry.
e. Annual stock take .
f. Material planning / Stock Analysis ABC / XYZ/ FSN
g. Periodic stock reports (Slow moving / non moving
items)
A.Functions / Objectives of of Inventory
B.management system
a. Reduce Purchasing and Inventory costs
b. Gain Visibility into Inventory Processes
c. Improve Customer satisfaction
d. Reduce Time to market
e. Smoothing out irregularities in supply
f. To Meet anticipated demands
g. To Hedge against price rise
.f. To take advantages of order cycle