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8/8/2019 Final Komal Inventory
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INVENTORY MANAGEMENTINVENTORY MANAGEMENT
PRESENTED BYPRESENTED BY --HARSHAHARSHA MULCHANDANIMULCHANDANI -- 1919KOMALKOMAL BHOJWANIBHOJWANI -- 2828
SANJEEVSANJEEV TOKASTOKAS -- 4848SOUMYADEEPSOUMYADEEP RAYRAY -- 5858TEJINDERTEJINDER SINGHSINGH 6363VIJAYVIJAY GUJRALGUJRAL 6767
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WHY ARE INVENTORY IMPORTANTWHY ARE INVENTORY IMPORTANT
For a firm today : -a) Customer do not easily forget shortages or
delivery delays.
b) But tremendous stocks are costly.
c) Critical to a firm`s viability.
Concerns every industries: -
a) Nowadays : success stories like Wal-Mart,
Toyota, or Dell are founded on keeping
inventories lean. 2Retail Management - P5
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INVENTORY MANAGEMENTINVENTORY MANAGEMENT
IN RETAILIN RETAIL
Carry the right inventory.
Carry the right amounts of
inventory.
Manage cash flow
Earn a profit 3Retail Management - P5
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WHY IS IT DIFFICULTWHY IS IT DIFFICULT
Humongous Assortment Of Goods.Humongous Assortment Of Goods.
Consumer Preference is largelyConsumer Preference is largelywhimsical.whimsical.
Difficult To stock and keep track.Difficult To stock and keep track.
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INVENTORY : BETWEEN SUPPLY &DEMANDINVENTORY : BETWEEN SUPPLY &DEMAND
Supply
ProcessDemand
Products Products
demand
Supply process:All activities that add new stock
Demand process:All activities that subtract material from the
inventory.
Function of an inventoryFrom the mismatches between supply and
demand.
To serve as a buffer.
Inventory
Demandprocess
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MERCHANDISE PLANNINGMERCHANDISE PLANNING
FUNDAMENTALFUNDAMENTALInventory Management is based on a four PartEquation :
S
ales + EndingI
nventory BeginningI
nventory =Purchases .
Finding the missing Number.
Applying The Formula.
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THE DIAMOND OF DOOMTHE DIAMOND OF DOOM
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THE BASICSTHE BASICS
Inventory Investment Control
Inventory Replenishment
Sales Forecasting
Periodic Inventory Changes
Recording
I
nventory
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TWO FUNDAMENTAL INVENTORYTWO FUNDAMENTAL INVENTORY
DECISIONSDECISIONSHow much to order of each material when
orders are placed with either outside suppliers
or production departments within organizations.
When to place the orders
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INDEPENDENT DEMAND INVENTORYINDEPENDENT DEMAND INVENTORYSYSTEMSSYSTEMS
Demand for an item carried in inventory is
independent of the demand for any other item
in inventory.
Finished goods inventory is an example.
Demands are estimated from forecasts
and/or customer orders
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DEPENDENT DEMAND INVENTORYDEPENDENT DEMAND INVENTORY
SYSTEMSSYSTEMSItems whose demand depends on the demands forother items
For example, the demand for raw materials andcomponents can be calculated from the demand for
finished goods
The systems used to manage these inventories are
different from those used to manage independent
demand items
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QUANTITY DISCOUNT MODELQUANTITY DISCOUNT MODEL
Price reductions given for large purchases.
Rationale: obtain ecenomies of scale and pass
some (or all) of these savings on to the customer
.
The buyer must weigh the potential benefits of
reduced purchase price and fewer orders against
the increase in carrying cost caused by higherinventories.
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VENDOR MANAGEVENDOR MANAGE
INVENTORYINVENTORY
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Traditional Method
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VIM Method
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BENEFITSBENEFITS
Reduce Inventory Level.
Reduced Stock Out Problem.
Reduced Forecasting & Purchasing Activities
.
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RFIDRFID SYSTEMSYSTEM RFID systems
a) 2 basics hardware components:-
transponder and an interrogator : tag and
reader.
b)Reader emits a radio wave at a certainfrequency that is received by the tag.
c)The tag is designed to respond with data that is
then read by the reader.
Goals
a) Electronic system : data mangement
b) To tightly follow and manage flows22Retail Management - P5
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REALITY OF INVENTORYREALITY OF INVENTORYPLANNINGPLANNING
ABC Classification.
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A B C ANALYSISA B C ANALYSIS
Always Better Control is an analyticaltechniques for classification of inventory items
was first introduced by an AMERICAN FIRM-
GENERAL ELECTRIC COMPANY.
According to this analysis, there are three
categories of inventory items A, B and C type
. Depending upon their percentages of
consumption.
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The significance of this analysis is that a very
close ctrl is exercised over the items of Agroup which account for high percentage of
costs.
Less stringent ctrl is adequate for category B.
Very little ctrl would be sufficient for CategoryC.
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Criteria A type B type C Type
Quantity 10% 20% 70%
Annual Usage 75% 15% 10%
Control Verystrict
Moderate Less
Ordering Daily/weekly
Monthly Yearly
Safety stock Less Moderate High
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POLICIES FOR ~A GROUP ITEMSPOLICIES FOR ~A GROUP ITEMS They should be ordered more frequently to
reduce capital lock up at a time in inventoriesas 15 percent of items cost 65 percent of totalvalue.
The purchasing department should Make themaximum efforts to expedite and delivery ofthese items are to be stored as few in number aspossible.
The purchase of these items should be with topofficials to ensure prompt services from thesupplier.
The stock report of A items should be sentmore frequently, say at least once in 15 days.
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POLICIES FOR ~B GROUP ITEMSPOLICIES FOR ~B GROUP ITEMS
These account for 20 percent of total quantityand 20percent of the total value.
Order quantities, re-order stocks and safetystock should be fixed and revised for B items
at least one in every 4 to 6 months.
B items should be ordered less frequently than
A items
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POLICIES FOR ~C GROUP ITEMSPOLICIES FOR ~C GROUP ITEMS
C group of items account for 65 percent ofquantity and hardly 15 percent of value.
Large quantities can be brought at a time, astotal investment will be least.
Paper work can be reduced considerably if
orders are placed once or twice a year.
The source of supply can be one or two based on
their reliability.
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THANK YOUTHANK YOU
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