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HML Inventory Classification Overview

Production planning and control involves various types of analysis for Inventory mangement and control, HML analysis is one of them.

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Sea Mech
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319 views6 pages

HML Inventory Classification Overview

Production planning and control involves various types of analysis for Inventory mangement and control, HML analysis is one of them.

Uploaded by

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

HML Analysis

Presented By -
Rutuj Jagtap (667)
Tejas Davande (6)
What is HML Analysis ?
HML Analysis classifies inventory based on how much a product costs/its
unit price.

The Classification is as Follows :

 High Cost (H) – Item with a high unit value.


 Medium Cost (M) – Item with a medium unit value.
 Low Cost (L) – Item with a low unit value.
Objectives of HML analysis
 Determine the frequency of stock verification.

 To keep control over the consumption at the department level.

 To evolve buying policy, to control purchase.

 To delegate the authority to different buyer.


HML analysis helps an organization to take decisions on the following:

a) It helps to assess the security requirements and the type of storage for high
priced items. For example, expensive ball bearings can be kept under lock and key in
a cupboard.

b) The frequency of stock checking is decided on the basis of the cost item. In
other words, more expensive the item, more frequent will be its stock-checking.

c) A control on purchases and buying policies can be exercised by the company.


This means H and M items will not be ordered in excess of the required minimum
quantity. However, in the case of L items, they may be purchased in bulk in order to
avail the benefits of bulk purchase.
Example
Let ‘x’ be the unit price value of an item.

The management then categorizes the item as follows,

For x > 500 ~ H

For 50 < x < 500 ~ M

For x < 50 ~ L

*The categorization therefore is decided solely by the management.*


Graphical Representation

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