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.

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