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This is short presentation which tries to explain the inventory management in Financial Management by taking Tata Steel as an example. This presentation was prepared along with Shashank M.A, Gautam Raj, Prasad E. Prabhu & Abhishek Bose (MSRIM Bangalore) By:- Aniruddh Tiwari Linkedin :- http://in.linkedin.com/in/aniruddhtiwari
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Inventory Management Of
S t e e l
Inventory Management Of
S t e e l
Inventory Management Of Group 3
PGDBM- II Sem Section ‘A’
Abhishek Bose Anirudh Tiwari
Gautam Raj Prasad E. Prabhu
Shashank M.A.
IntroductionInventory consists of
Raw materialsWork in progressFinished goodsInventory in transit
Benefits of holding inventorya) Benefits in productionb) Benefits in purchasec) Benefits in sales
Objectives of inventory management
To provide adequate inventory for the firm’s requirement in the process of work
To minimize firm’s investment in inventory
To ensure smooth flow of materials in production & sales operations
Costs & Benefits of Inventory
Methods of Inventory ManagementEconomic Order Quantity
Assumptions in EOQ method
The firm can forecast accurately its annual requirement
Usage of inventory is steadyThere is no time gap between ordering & the
supply of inventoryOnly two types of costs are considered:
ordering cost & inventory carrying costBoth costs are constant for the given inventory
level
Calculation of EOQ
TC = P*D + (D*S)/Q + (H*Q)/2
Q = √(2*D*S)/H
where,TC = total costP = purchase cost per unitD = annual demand of the raw materialS = fixed cost per orderH = annual holding cost
Limitations
a) Accurate forecast of annual requirement difficult.b) No time gap between ordering & supplying of raw
materials assumed, which may not be the case.c) Demand for a product may not be uniform throughout
the year.d) EOQ of manufacturing firm may not be economical for
the supplier.e) Better discounts may be offered by the supplier for
placing orders higher than EOQ.
Other methods of Inventory Management
Just In Time (JIT)ABC analysisHigh, Medium, Low (HML) classificationsVital, Essential, Desirable (VED) ClassificationsScarce, Difficulty, Easy (SDE) ClassificationsFast moving, Slow moving, Non moving (FSN)
AnalysisSeasonal & Off Seasonal (SOS) AnalysisXYZ AnalysisGovernment, Open market, Local & Foreign source
(GOLF) Analysis
Inventory Management of Tata SteelAmount : Rs. In Lakhs
Graph Showing Consumption & Stock of Raw Materials
Amount : Rs. In Lakhs
Work In Progress (WIP)
Product line of TATA STEEL includes long tubes,semis,hot rods, cold rods and galvanized tubes.
Tubes division uses Just –In-Time purchase system .A look at the chart indicates though in the last four
years sales has remained same or decreased , the stock of raw material has increased. This is due to the fact that price of raw material has increased but company is not able to increase the price due to stiff competition. Increase in inventory may also be due to wrong estimation of orders.
The chart of WIP shows that both cost of goods produced and WIP have increased during the period. work in progress holding period also has gone up which the company must look into.
THANK YOU
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