HOUSEHOLD INVENTORY

MANAGEMENT
GROUP ASSIGNMENT

INVENTORY MANAGEMENT
19.1 UGC
ACKNOWLEGEMENT

The completion of this assignment could not have been possible without the participation and
assistance of so many people. We would like to express our special thanks and gratitude to our
lecturer Mr. Ruwan Nawarathna who gave us this opportunity to do this assignment of inventory
management on how inventory management happens at home & recommendations for
improvement and answering the questions covering the areas of reorder point, minimum order
quantity, economic order quantity, cost planning, and stock replenishment. Also this assignment
cannot be completed without the effort and corporation from our group members. Thus their
efforts are warmly embraced and gratefully acknowledged. Finally, we would like to dedicate this
report as an appreciation for all your support.
Contents
ACKNOWLEGEMENT..................................................................................................................................... 1
1. INTRODUCTION ........................................................................................................................................ 3
1.1 What is inventory management? ...................................................................................................... 3
1.2 Utilization of resources in households. ............................................................................................. 3
1.3 Linking inventory management with households. ............................................................................ 4
1.4 Why is Inventory and warehouse management important for Households ................................... 4
2. ECONOMIC ORDER QUANTITY ................................................................................................................. 5
2.1 What is EOQ........................................................................................................................................ 5
2.2 EOQ can be implemented at an average house hold for the optimum usage of resources............ 5
2.3 Benefits of using EOQ......................................................................................................................... 6
3. COST PLANNING ....................................................................................................................................... 6
3.1 What is cost planning ......................................................................................................................... 6
3.2 Benefits of cost planning.................................................................................................................... 7
4. REORDER POINT ....................................................................................................................................... 7
4.1 What is Reorder point ........................................................................................................................ 7
4.2 Benefits of Re-Order Point ................................................................................................................. 8
5. MINIMUM ORDER QUANTITY .................................................................................................................. 9
5.1 What is MOQ ...................................................................................................................................... 9
5.2 Why does most of the suppliers operate with MOQ ........................................................................ 9
6. STOCK REPLENISHMENT ......................................................................................................................... 10
6.1 What is stock replenishment ........................................................................................................... 10
6.2 Benefits of Replenishment ............................................................................................................... 10
7. RECOMMENDATIONS ............................................................................................................................. 11
8. CONCLUSION .......................................................................................................................................... 11
9. REFERENCES ............................................................................................................................................ 13
10. ASSESSMENT FEEDBACK ...................................................................................................................... 14
1. INTRODUCTION
1.1 What is inventory management?
Inventory management simply refers to the process of ordering. This incorporates the
administration of raw materials, work in progress goods and finished goods and these are the
three main classification of inventory. Assembling organizations buy raw materials or work in
progress goods and store them until prepared for creation, and change them into final products.
Nonmanufacturing organizations, like discount wholesalers and retailers, stock finished products
for the ultimate customers.

All organizations should find some kind of harmony between stock levels and request since stock
uses an organization's money and brings about conveying costs. Notwithstanding the sort of
business, organizations should keep up close command over stock to moderate money while
guaranteeing they have sufficient stock to meet creation plans or gauge client interest and real
orders.

When it comes to the advantages of inventory management, Stock administration is fundamental

to an organization's wellbeing since it helps ensure there is infrequently excessively or too
minimal stock close by, restricting the danger of stock outs and incorrect records. Same as an
organization the stock level in a household is administered well by parents and they have a
thorough understanding on how the inventory should be handled like when and how often
should the products need to be purchased and also effective inventory management helps to
save money and time.

1.2 Utilization of resources in households.

Family assets comprise basically of the wages procured, pay from property (premium, profits,
pay from land, and so forth), of income from market creation and social advantages. The
equilibrium of the working record of families possessing sole ownerships is classified monthly
payments since it relates indistinguishably to the compensation for the individual business
visionary and to the compensation of his beneficial capital.
A family stock is a rundown of significant things in a private property. It incorporates the cost of
everything. The deficiency of a thing from the stock can be accounted for to the guarantor for
substitution or discount. It is also called a home inventory.

Every family strives for a physically and mentally fit lifestyle. To obtain a life that family members
are able to live, it is first necessary to meet basic needs namely food, clothes, education, shelter,
and so on. Human and non-human resources are the two types of resources used in households.
Human resources are resources that individuals possess and use (time, energy, expertise,
abilities), while non-human resources are resources that are external to individuals but can be
possessed and utilized (money, material goods, community facilities). It's critical to make
efficient, effective, and cost-effective use of both human and non-human resources to achieve a
desired lifestyle.

1.3 Linking inventory management with households.

A key component in effective household management is control. By understanding what supplies
are available at a given time, the administrator will actually want to design food orders, figure
since the past stock, and make menu thing changes if necessary. By watching out for stock, it is
feasible to note possible issues with pilferage and waste.

Managing inventory is like checking a bank account. Similarly, as you are keen on how much cash
you have in the bank and whether that cash is paying you enough in revenue, so the director
ought to be keen on the estimation of the provisions in the storeroom and in the kitchen. Despite
the facts that households don’t have a systematic inventory management procedure as business,
they do have a procedure to maintain their stock levels. For instance, if the stock of rice becomes
depleted, mother informs father to repurchase it. In addition, father will purchase a 5kg of rice
to feed the family for the next month. The same theoretical method is followed in business. As
stock volumes decline to a point where they are insufficient to meet production needs (reorder
level), the production manager notifies the buying department to fill the void.

1.4 Why is Inventory and warehouse management important for Households

In a household there are inventory items needed for daily, weekly or monthly to conduct day to
day operations smoothly. A household that has basic living conditions requires essential
inventory items for kitchen, laundry, bathroom, etc. It is necessary to maintain the inventory
needed otherwise it can increase the cost and time. Thus to carryout day to day functions in the
household the house owner makes decisions regarding the inventory like how much stock
needed for kitchen supplies to do the cooking daily as an example how many packets of spices
needed, for how long the stock will last, how to store them safely without being damaged. How
many detergents or fabric softeners needed for laundry and cleaning. If the inventory is properly
managed in a household, stock outs or excess stock can be controlled and it leads to save cost
and time. Also if the inventory is properly managed and supplied on time, a household house
owner can save storage space if the household does not have space.

2. ECONOMIC ORDER QUANTITY

2.1 What is EOQ
The Economic Order Quantity (EOQ) is the minimum quantity that can be purchased to keep
inventory costs as low as possible. Usage of EOQ helps to reduce inventory wastage and to
maintain the stock level very smoothly. For an example, if we purchase more than the required
products we need for a week it would be a huge wastage because some products cannot be
stored more than a week as they get expired and also if we order less we have to order again so
it will create an extra cost for time, transportation. So by using this model we can reduce the
costs like, ordering cost, holding cost, and shortage cost as this model helps to get the optimum
quantity that is needed by a household.

2 × 𝐷 × 𝐶𝑂 2 × 𝐴𝑛𝑛𝑢𝑎𝑙 𝑑𝑒𝑚𝑎𝑛𝑑 × 𝐶𝑜𝑠𝑡 𝑜𝑓 𝑜𝑟𝑑𝑒𝑟

𝐸𝑂𝑄 = √ = √
𝐶𝐻 𝐶𝑜𝑠𝑡 𝑜𝑓 ℎ𝑜𝑙𝑑𝑖𝑛𝑔

2.2 EOQ can be implemented at an average house hold for the optimum usage of resources.
For an example, assume if the house is powered up from LPG (Liquid Petroleum Gas), EOQ can
be used to calculate the optimum quantity of LP gas that needs to be purchased.
D = Annual Usage/ Demand = 300 Liters of LPG
Co- Cost of Placing an order = 200 LKR
Ch- Cost of Holding a unit = 150 LKR
 2×300×200
𝐸𝑂𝑄 = √ = 28.28
150

As the above solution the optimum order quantity is 28.28 LPG liters per year. LPG tanks are
usually in 12.5KG tanks. So, the EOQ level is 2 Tanks at one time. (28.28 ÷ 12.5 = 2.26 tanks) and
11 orders (300÷28.28=10.61 orders) needs to be made within a year.

2.3 Benefits of using EOQ.

Maintaining EOQ level minimize the cost of inventory as it helps to determine how much is
needed to be ordered for a particular time period, also we are ordering a particular product in
small quantities hence the ordering cost is also reduced and is more cost effective for the
household, it minimize the stock outs because it helps to understand how much is needed to be
re-ordered and how often by a household, and it helps to make better decisions when storing
and management of inventory and that leads for the improvement of the overall efficiency.

3. COST PLANNING
3.1 What is cost planning
Cost planning is a way of keeping a project's cost under control before it reaches the tender stage
or it simply means estimating the future expenses of an entity. There are many benefits of cost
planning even though it is not practical for a household. In an organization the cost planning is
done for the expenditures related to travelling, fuel, warehousing, packing, security. Likewise, in
a household the cost planning is done for food and beverages, cleaning substances, electricity,
telephone charges, furniture’s. The flow of money in the household is guided or regulated by cost
planning. It enables you to invest or spend money on the most important things while also saving
for future investments.

There are several factors that need to be considered when planning the cost because it changes
due to seasons like new year, functions like weddings, dinner nights, hangovers, funerals. It also
changes due to time as it is difficult to estimate the amount of inventory used for a particular day
and how much it costs. Due to unpredictable situations like natural disasters, health issues the
financial stability may fluctuate and this would negatively result on cost of a household.
For an example, assume that the monthly income of a family is Rs.100000 and there are four
members in a family. So the cost plan for the month would be as follows,

 Food and beverages = Rs.30000

 Cleaning = Rs.10000
 Electricity, telephone and water = Rs.5000
 Education = Rs.10000
 New clothes = Rs.12000
 Travelling = Rs.5000
 Other expenses = Rs.4000
By excluding all the expenditures from the income then there would be a saving of Rs.24000.

3.2 Benefits of cost planning

 Additional cost can be identified in advance
 Can maximize the profits
 An inventory management process can be maintained continuously
 Cash flows can be managed effectively
 Flexible to work and adopt to any situation.
 Cost planning helps to understand how to manage the available resource appropriately by
minimizing wastage and unnecessary expenses.
 A well-organized plan helps to maintain a balanced and a healthy life among family members.

4. REORDER POINT
4.1 What is Reorder point
The unit volume on hand that causes the procurement of a fixed volume of replenishment
inventory is known as a reorder point. It is the minimum quantity of a commodity that a company
has in storage, and it must be reordered if the stock falls below that amount.

This approach is based on the idea that the order must be placed at a certain time so that the
goods are delivered only before the stock level drops below the safety stock level. The safety
stock is never broached because of this method. For this approach to work, the safety stock level
must be high enough to eliminate the possibility of a stock out. So, if we apply this approach to
our daily household tasks, we won't run out of supplies unexpectedly, and we won't have to hurry
to the market because this reorder point technique will keep things in order.

The reorder point is calculated by multiplying a stock item's average daily usage rate by the lead
time in days to replenish it. The safety stock is also essential when calculating the reorder point.
For an example, if we take rice, it is one of the most frequently used kitchen products, hence you
need to have rice in stock. If you are out of stock, it will be difficult to manage. Furthermore,
having excess stock means you won't be able to store your other kitchen necessities and it’s a
wastage.

For an example, if we assume that the average daily consumption is 1kg of rice and the if it takes
30 days of lead time to go back for a grocery store then the demand will be 30days × 1kg = 30kg
per month. And as the amount of quantity is relatively low it is necessary to maintain a safety
stock for just in case. So if we keep a safety stock of 5kg of rice as backup, then the reorder point
would be 35kg (30+50).

So, as previously mentioned in the example, when the rice amount reaches 35kg, the rice stocks
should be reordered. By implementing this approach to the household, not just in kitchen, but
also for stationery, other groceries, and stuffed products, any possible inconveniences can be
avoided.

4.2 Benefits of Re-Order Point

 It allows for a continuous inventory movement with no pauses. This improves the household's
inventory management even more.
 It provides a forum for identifying procurement problems and assisting in their resolving,
resulting in a more efficient process.
 Ensures that the inventory is constantly available, preventing production problems.
 Unnecessary product storage and maintenance expenses are minimized.
 It assists the family in making rational choices by monitoring the entire purchasing process.
5. MINIMUM ORDER QUANTITY
5.1 What is MOQ
The lowest fixed volume of stock a retailer or a supplier is willing to utilize is a minimum order
quantity (MOQ). If you can't meet a product's minimum order quantity, the seller won't market
it to you. In e-commerce, it is most commonly used by a producer or retailer in the form of a
production run, although a merchant may put MOQs in order for various types of orders. MOQ
words can sound awful when you're on the buying side, but they're amazing when you're on the
selling side. Many E-Commerce companies deal with retailers who have minimum order quantity
conditions in place, and certain brands may be in a position to enforce their own MOQs by
wholesale agreements or minimum spending thresholds.

5.2 Why does most of the suppliers operate with MOQ

The main reason suppliers are using MOQs is that they want to manage the cost of producing a
commodity. Suppliers are interested in creating the commodity, in covering the full costs and
even in making profit. To do this, they quantify each expense and come up with a figure that will
work for them and their clients. Suppliers have a minimum order quantity of 1 unit. And that
doesn't mean that the supplier is getting money out of their single unit sold, but they're able to
take a loss and get the client back. If a supplier is willing to have a MOQ of 1 then it is most likely
that they are fresh and are trying to generate a company. Another rationale supplier set MOQs
is that the volume is likely to be the smallest number of units they can produce in a single
production run. Manufacturers buy their materials in bulk because they produce items in bulk.
The installation and operation of their machinery cannot be time-consuming or cost effective
unless they guarantee that a certain amount of units of their production will be paid for. That is
why they set their MOQ to match their value.

Example: We don’t visit a supermarket each and every time we want something. Instead, we
create a grocery list, and when we know we have certain number of items to purchase, then we
go to a supermarket to buy all the goods that is need to be purchased. This will lead to save the
time because a person doesn’t need to visit the supermarket for several times. By one time visit
he or she can fulfill the requirement. And also this will save the transportation cost because
numerous visits can lead to a cost and it will not happen here as this method gives the access to
the best and the cheapest price for each unit of product purchased.

6. STOCK REPLENISHMENT
6.1 What is stock replenishment
Stock replenishment is the process of inventory moving from reserve storage to primary storage,
then onto picking locations. Sometimes it is used to define both finished goods as well as raw
materials received from suppliers. This helps to ensure when, where and what product is
available in stock. When we associate replenishment with our home, we may organize our
cooking ingredients, monitor the consumption pattern, and identify a re-order point. As a result,
the mayor of the house will keep an eye on the inventory level and ensure that the kitchen has
adequate storage to last a particular period or not. If there is a shortage of kitchen supplies,
households will know it is time to reorder from a store in a predetermined quantity to replenish
the stock.

6.2 Benefits of Replenishment

 Practicing stock replenishment reduce inventory levels and inventory turnover.
 Stock replenishment can improve stock availability on time which leads to greater customer
satisfaction and increase in the revenue.
 Productivity of the kitchen increases due to stock replenishment.
 Time Management
 By separately storing the products like onions and potatoes helps utilize the maximum
storage capacity.
 Storing food in the right place is another benefit for an example, storing the perishable items
like milk, meat, butter in the refrigerator and spices in the cupboard is the best way to store
the goods.
7. RECOMMENDATIONS
A systematic inventory management process helps for a smooth functionality of an organization
and as well as for a household and it helps to enhance the overall efficiency of resources.
Inventory management is an important role, if an individual is willing to live a standard life.
Households are capable of planning inventory like businesses forecast their economic order
quantity, reorder point, cost planning and stock replenishment.

Imagine if a household is not following a systematic inventory management procedure and they
tend to purchase quantities which are higher than the EOQ level or lower than the EOQ level and
this will result a higher ordering and a holding cost and also a wastage of resources because the
optimum quantity is not being identified. But as mentioned in section 2.2, it state that the
optimum order quantity of the LP gas used in a household is 28.28 liters per year, the ordering
cost is Rs.200, and the holding cost is Rs.150 and the number of orders that need to be done is
11 per year. Likewise, if the households utilize the resources according to the EOQ level it would
help to minimize the wastage and to improvise productivity.

It is best to maintain a monthly cost plan for a household because the income level is varying
most of the time based on the salary and also if it is prepared on annual basis an overall figure
can be taken as well.

In present it is easier to keep track of many this due to the advancement of the technology. So in
order to keep track of the inventory levels the households can use the apps like inflow, odoo,
Sortly, zhenhub, Nest Egg. These apps enable to keep tack on inventory levels in a systematic way
and helps for the smooth functionality of the household and it saves time and reduce the
wastage.

8. CONCLUSION
Optimum utilization of resources is a main factor that is considered in inventory management. If
there is no systematic way to manage the available resources it would be a higher cost for a
household. Hence to overcome the issues it is necessary to maintain the inventory level in a
systematic way and there are several techniques like Economic Order Quantity, Reorder point,
Minimum order quantity, cost planning, and stock replenishment that helps the households to
understand and take better decisions regarding the inventory management.

EOQ helps to determine the optimum order quantity with the least possible ordering and holding
cost that is needed to be purchased. Thus this helps to minimize the total inventory cost because
the resources are optimally utilized and there is no wastage of resources. It is better to have a
cost plan because it helps to maintain the monthly salary in an efficient way as it reduces the
unnecessary expenditures and also can save more for future.

Reorder point is necessary to be examined as it determines when and how much of inventory is
needed to be re ordered again when stock outs. A household need not be scared because a there
is a safety stock maintained and when stock out the safety stock can be used until the stock is
reordered.

By using the minimum order quantity method, it helps to determine the most required quantity
that is needed for the household and this will reduce the excess purchase of goods and
unnecessary expenditures. Stock replenishment helps to decide the how long will the stock last
and when, where, and which products are available and the optimum quantity. Thus this will
ensure the productivity of the household and how the resources are fully utilized.

According to the above explanations it is understood that having a systematic inventory

management plan helps for the improvement of the productivity of a household.
9. REFERENCES
 StartupBros. (n.d.). MOQ: What is MOQ and Everything You Need to Know. [online]
Available at: [Link]
moq/#:~:text=The%20main%20reason%20suppliers%20use [Accessed 13 Mar. 2021].

 ShipBob. (n.d.). What is EOQ (Economic Order Quantity)? + Formula. [online] Available at:
[Link]

 DEAR Cloud Inventory Management. (2017). Minimum Order Quantity: What It Is and How
to Make It Work for You | DEAR Cloud Inventory Management. [online] Available at:
[Link]
 Callarman, S. and Callarman, S., 2021. What is EOQ (Economic Order Quantity)? + Formula |
ShipBob. [online] ShipBob. Available at: <[Link]
quantity/> [Accessed 11 March 2021].

 TradeGecko (n.d.). What is Inventory Management? | 10 guides to mastering commerce.

[online] [Link]. Available at: [Link]
management#:~:text=Inventory%20management%20is%20a%20systematic.

 Hayes, A. (2019). The Ins and Outs of Inventory Management. [online] Investopedia.
Available at: [Link]

 [Link]. (2018). Cost Planning and Control in Construction. [online] Available at:
[Link]
[Link].

 ECN | E-Commerce Nation. (n.d.). What does MOQ mean? Discover What MOQ Is and How
to Negotiate It. [online] Available at: [Link]
mean/ [Accessed 13 Mar. 2021].

 [Link]. (n.d.). Stock Replenishment Definition (Supply Chain). [online] Available at:
[Link]
definition#:~:text=In%20supply%20chain%2C%20the%20stock [Accessed 13 Mar. 2021].
10. ASSESSMENT FEEDBACK
Feedback Form

Assignment: Group Report

No. Student Number Name Signature

01 22010348 IJ Nupearachchi

02 22005488 TNK Karunaratne

03 22015197 PKWPB Jayarathna

04 22008428 PUW Athukorala

05 22003661 RPDSD Perera

06 22012088 VH Mendis

Marks
Evaluation Criteria - Report Total Marks
Obtained
Content of the report 4
How set objectives achieved with limited resources 3
Professional approach & neatness 4
Creativity 4