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Lecture 09 Inventory Introduction

The document discusses inventory management, defining inventory as usable but idle resources, including raw materials, components, work-in-process, and finished goods. It outlines the functions and objectives of inventory control, emphasizing the importance of maintaining adequate supply, minimizing financial investment, and ensuring timely replenishment. Additionally, it introduces ABC Inventory Analysis, categorizing items based on their value to determine the level of control required.

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9 views8 pages

Lecture 09 Inventory Introduction

The document discusses inventory management, defining inventory as usable but idle resources, including raw materials, components, work-in-process, and finished goods. It outlines the functions and objectives of inventory control, emphasizing the importance of maintaining adequate supply, minimizing financial investment, and ensuring timely replenishment. Additionally, it introduces ABC Inventory Analysis, categorizing items based on their value to determine the level of control required.

Uploaded by

imrankink455
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

1

ME 461 LECTURE # 09

INVENTORY

DR. MD. SANAUL RABBI Department of Mechanical Engineering


ASSOCIATE PROFESSOR Chittagong University of Engineering & Technology

Introduction
2

❖ An Inventory consists of usable but idle resources


such as men, machine, materials or money.
❖ When the resources involved is material, the
inventory is also called ‘stock’.
❖Inventories represent those items which are either
stocked for sale or they are in the process of
manufacturing or they are in the form of materials,
which are yet to be utilized.
❖ An effective control on inventory is a must for
smooth and efficient running of the production cycle
with least interruptions.
3

Forms of Inventory
4

➢Raw materials –purchased items or extracted


materials transformed into components or
products
➢Components –parts or subassemblies used in
final product
➢Work-in-process –items in process throughout
the plant
➢Finished goods –products sold to customers
➢Distribution inventory –finished goods in the
distribution system
Functions of Inventory
5

✓To stabilize production.


✓To take advantage of price discounts.
✓To meet the demand during the
replenishment period.
✓ To prevent loss of orders (sales).
✓ To keep pace with changing market
conditions.

Inventory Control
6

Inventory control basically deals with two


problems:
(i) When should an order be placed? (Order
level), and
(ii) How much should be ordered? (Order
quantity).
ABC Inventory Analysis
7

ABC Inventory Analysis


8
ABC Inventory Analysis
9

A-item: Very tight control, the items being of


high value. The control need be exercised at
higher level of authority.
B-item: Moderate control, the items being of
moderate value. The control need be
exercised at middle level of authority.
C-item: The items being of low value, the
control can be exercised at gross level of
authority.

Objectives of Inventory Control


10

1. To ensure adequate supply of products


to customer and avoid shortages as far as
possible.
2. To make sure that the financial
investment in inventories is minimum.
3. Efficient purchasing, storing,
consumption and accounting for materials
is an important objective.
Objectives of Inventory Control
11

4. To maintain timely record of inventories


of all the items and to maintain the stock
within the desired limits.
5. To ensure timely action for replenishment.
6. To provide a reserve stock for variations
in lead times of delivery of materials.

Benefits of Inventory Control


12

1. Improvement in customer’s relationship


because of the timely delivery of goods and
service.
2. Smooth and uninterrupted production and,
hence, no stock out.
3. Efficient utilization of working capital.
Helps in minimizing loss due to deterioration,
obsolescence damage and pilferage.
4. Economy in purchasing.
Inventory Models
13

14
15

Thank You

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