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This document presents the basic concepts of inventory management, including definitions of stock, reorder point, and valuation methods. It also explains the objective of inventory management and the indicators used to evaluate inventory.
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0% found this document useful (0 votes)
8 views26 pagesInventory Management Training Module
This document presents the basic concepts of inventory management, including definitions of stock, reorder point, and valuation methods. It also explains the objective of inventory management and the indicators used to evaluate inventory.
Translated by
ScribdTranslationsCopyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
Module 3: Inventory Management
Training plan:
1/ the Basic Concepts :
Stock, magasin, stock d’alerte, stock Max, Min, système ABC,
Pareto system, Cump, Pump, GDS
2/ Definition and Objective of GDS
Definition
The function of the GDS,
3/ the valuation and assessment of Stocks
Valuation PUMP, FIFO, LIFO
Evaluation according to the standards
the factors for improving inventory
At the end of this module you will know:
1. The Basic Concepts of Inventory Management (GDS)
The objective of the GDS,
3. How to manage inventory,
4. The function of stocks,
5. How to optimize inventory,
6. Why a stock?
7. The logistics chain of stocks,
8. The valuation of stocks,
9. The inventories,
10. How to evaluate stocks?
11. The Stock indicators,
The Basic Concepts:
Stock: A stock is a quantity of goods available for a
given moment and which are in
waiting for use. It represents capital.
STORE: The word store (from the Arabic makhzin) refers to places
covers where goods are stored, as opposed to the word 'park'
applies to outdoor storage locations
POINT OF ORDER: Alert stock
PUMP: WeightedAverageUnitPrice. Valuation method of
stocks which consists of calculating the unit average value of the items
in stock by establishing the relationship between the value of the stock and the
stored quantities
DEAD STOCK: Stock with a turnover rate that is zero or very low.
The Basic Concepts:
PARETO LAW:
Also known as the 80/20 rule, it is a law inspired by the
observations of Vilfredo Pareto, Italian economist and sociologist:
environ 80 % des effets sont le produit de 20 % des causes. Cette
"law", although empirical, has been formalized in mathematics by
the Pareto distribution.
In stock: Classification method (20/80) of products in stock
which allows to distinguish the products
The basic concepts:
{"STOCK MAXI":"MAXIMUM STOCK","STOCK MOYEN":"AVERAGE STOCK","STOCK MINI":"MINIMUM STOCK"}
The maximum stock is equal to Safety stock + series
supply
The average stock is equal to safety stock plus series.
supply /2
The minimum stock is equal to the safety stock.
Basic Concepts:
ALERT STOCK
Higher than the protection stock, the alert threshold triggers the
order process. It is calculated to cover the
consumption between the moment we realize the need for
restocking until the new one is made available
delivery
The average stock
consists of two elements:
1/ The protection stock, also called safety stock, intended to
mitigate the risks due to the random nature of both
the supply rather than the consumption.
2/ The rotating stock, also called active stock, which evolves between a
maximum the day of delivery and a minimum corresponding to
protection stock.
The objective of inventory management:
The art of inventory management is to satisfy two
opposing and contradictory requirements: ensure a
the highest possible service rate with a cost
of the weakest possible possession.
HOW TO MANAGE STOCKS:
Stocks play a critical role for the company; it is composed of
from:
1/ Raw materials,
2/ Semi-finished products,
3/ Finished products,
4/ Supplies, consumables,
5/ Spare parts,
Each of these stocks is located between suppliers who
food and customers that need to be served within a desired timeframe, it is
a regulation reservoir between two flows that present
flow irregularities. the level of the tank must be at the right
level so that the flow is never interrupted.
HOW TO MANAGE STOCKS
it is actually a regulation reservoir between two flows that
present irregularities in flow. The tank level must
to be at the right level so that the flow is never interrupted.
The function of stocks
The stock helps to bridge gaps in pace between:
the market and the manufacturing of the product,
a stage of production and another
the production and the suppliers,
the size of a production batch and the size of a batch of
transport
How to optimize inventory
Optimizing inventory means achieving the ideal compromise between a
minimum storage cost and a maximum service rate. It is
be able to achieve the stock level that will correspond to the
cost decided and at the desired service rate.
En effet, l'entreprise peut avoir la volonté de viser un taux de de
service approaching for example 100%, even if it knows that this
will be at the cost of a significant level of inventory.
How to optimize inventory
On the contrary, it may accept a lower service rate if its
The current priority is to reduce storage costs.
The safest way to master the storage cost ratio / rate of
The service is to have sales forecasts that are as reliable as
possible.
In any field, one can only predict correctly if
we are able to model the past, that is to say to identify in
a history of statistical laws (trend, seasonality, etc..) that
it can be applied in the future.
Model selection (main models)
Why a stock?
The stock is the result of a difference between a flow
of supply and consumption.
Stock is essential in three cases:
1 - le délai d'approvisionnement et plus long que le délai
admissible to meet the needs,
2 - the differences in flows result from seasonal variations and
techniques that cannot be eliminated,
The risk taken must be covered by inventory.
Why a stock?
Other reasons that require companies to maintain inventory:
1/ for technical reasons, when production flows and
different usage profiles are present,
2/ economic reasons when fixed costs or
increasing returns appear in the processes of
fabrication or procurement,
3/ financial reasons if the company intervenes on
upstream or downstream markets with fluctuating prices,
Why a stock?
Many reasons require companies to make
stocks:
4/ for security reasons whenever uncertainty characterizes
the demand and supply conditions.
Stocks are thus a factor of flexibility for the company, but they
constitute a financial burden and an asset of
capital. Inventory management must be subject to a calculation.
strictly economic.
The logistics chain of stocks
The valuation of inventories:
A method for valuing inventory is necessary when the
articles are purchased at different prices, if only in
reason for inflation. This change in purchase prices must be
reflected in the value of the stock.
Purchases are valued at the cost of purchase.
Stock removals can be valued with one of the
methods below to allow for
the company to determine the value of its inventory:
FIFO, LIFO, CUMP,LOT
Inventories
The company must carry out a physical inventory.
(in quantities and values) of its stocks at least once a year to
the closing of the financial year, (2 times with the new accounting law SCF; 30
June) (Commercial Code).
2 types of inventory:
1/ the intermittent inventory: accounting: calculated in relation to
purchases, consumption, computer status of stocks.
2/ Permanent inventory: it is the physical counting of
quantities in stock with valuation, we can distinguish
multiple inventories according to the frequency
The economic evaluation of stocks
There are different methods to carry out management
stock economics, among them:
the Pareto Principle or the 80/20 rule:
it is a statistical rule that we observe very often, namely
that 20% of the company's products account for 80% of
of the turnover.
the ABC method:
constitutes a variant of the previous one; the stock is broken down
in three categories of articles:
- 15% of the volume represents 60% of the value;
25% of the volume represents 25% of the value;
- 60% of the volume represents 15% of the value.
The economic evaluation of stocks
Factors for Improving Inventory Management
Decrease in the number of references and decrease in
name of storage stores,
2/ La souplesse d'approvisionnement
3/ the quality and speed of information transmission
Stock management control is carried out at
starting from the stock indicators
The turnover rate, lead time
the number of stockouts
-Stock Max, Min..
The Dead Stock
Several factors contribute to determining the rotation speed
stocks: lead times, the duration of
manufacturing process, but also the product's lifespan
(perishable or not) or the seasonal nature of the activity.
Stock rotation
Generally, a high inventory turnover ratio is a sign of a
good management since the share of fixed assets in the
stocks are relatively low and the amount of stock kept
in reserve allows to meet the demand. A ratio of
high inventory turnover also indicates that the company is at risk
less being stuck with stock reserves
expired (outdated textile items), seasonal (liquid
antifreeze) or perishable (food products).