MPC

INVENTORY CONTROL

PRESENTED BYAMBARISH POTE (201043)PANKAJ KUMAR (201179)

INTRODUCTION

• Refers to material in stock.• It act as a buffer.• Effective control on inventory is must.

Types of inventories

1.Raw materials2.Bought out parts3.Work in process inventories(WIP)4.Finished goods inventories5.Maintenance,repair & operating stores6.Tools inventory7.Miscellaneous inventories

• Inventories can also be classifies as:(i)Fluctuation inventories(ii)Anticipation inventories(iii)Lot size inventories(iv)Transportation inventories

Reasons for keeping inventories

1.To stabilize production2.To take advantage of price discounts3.To meet the demand during replenishment

period4.To prevent loss of orders5.To keep pace with changing market condtions6.Other reasons

Inventory Control

• Inventory control is a planned approach of determining

(i)What to order(ii)When to order(iii)How much to order(iv)How much to stockSo that costs associated with buying & storing are

optimal without interrupting production and sales.

Objectives of Inventory Control

• To ensure adequate supply & avoid shortages.• Financial investment in inventory is minimum.• To maintain stock within desired limits.• To ensure timely action for replenishment• To provide a reserve stock for variations• To provide a scientific base for planning of

materials.

Benefits of Inventory Control

• Improvement in customers relationship• Smooth & uninterrupted production• Efficient utilization of working capital• Helps in minimizing loss• Economy in purchasing

Costs associated with inventory

1.Capital cost2.Ordering cost:(i)purchasing(ii)inspection(iii)accounting(iv)transportation cost

3.Inventory carrying costs(holding cost):(i)Storage cost(ii)Handling cost(iii)depreciation, insurance(iv)Costs on record keeping(v)Product deterioration(vi)Spoilage, breakage.

4.Shortage cost:(i)Backorder cost(ii)Loss of future sales(iii)Loss of customer goodwill(iv)Extra cost associated with urgent order

Inventory Control Terminology

• Demand• Order style• Lead time• Safety stock• Inventory turnover• Re-order level(ROL)• Re-order quantity

Inventory cost relationships

Types of Inventory Control Models

1.Economic order quantity(EOQ) with instantaneous stock replenishment.

2.EOQ with gradual stock replenishment3.EOQ when shortages are permitted4.EOQ with prize discount

Dulux Paints

Case Study

•ICI (Dulux paints)•5 plants in India•2 types of paints Water based

Solvent based

Case study

• Koparkhairne plantProduces

base color (white)Red & yellow

Other colors met through vendors through

JIT

Case Study

• Packaging done entirely at Koparkharaine• Raw materials for it stored • Goal - Production never stops

Inventory Control enters

Market demand

• Festive season - - - > Diwali - -> Huge Inventory

Results

• SAP used for inventory control

Before : - 28 days

After : - 13 days

• In 2007 : - 90 crores inventory

• In 2010 : - 48 crores ,,

• Production per day (p) = 150 KL• Use per day (d) = 100 KL• Cost price (Cp) = 35000• Inventory carrying cost (I) =25%• Setup cost (Co) = 400Q* = ((2*D*Co)/(Ch*(1-d/p)))^0.5N* = D / Q*

Conclusion

Inventory control is Important in terms of• Cost• Time