PES’S
MODERN INSTITUTE OF BUSINESS
MANAGEMENT
INVENTORY CONTROL
TECHNIQUES
SUBJECT : OPERATIONS AND SUPPLY CHAIN
MANAGEMENT
GUIDE BY : PROF. PRAPTI DHANSHETTI
Presented By
FIN211246 Prasnna Kale
FIN211271 Shubham Ghuge
FIN211235 Namrata Pensalwar
FIN211260 Rohan Dandgaval
FIN211223 Harsha Patil
FIN2112 Ragini Mehare
FIN211285 Tejaswini Mule
FIN211290 Vaishnavi Shere
FIN211212 Ashutosh Indrale
Types of Inventories
Raw materials
Purchased parts and supplies
Finished Goods
Work-in-process (partially completed products)
Items being transported
Tools and equipment
Nature of Inventories
Raw Materials
Basic inputs that are converted into finished product through the
manufacturing process.
Finished Goods
Completely manufactured products ready for sale.
Techniques of Inventory Management
Just In Time (JIT) Method
Material Requirements Planning (MRP) Method
Economic Order Quantity (EOQ) Model
Minimum Safety Stocks
VED Analysis
Just In Time (JIT) Method
In the Just in Time method of inventory control, the company
keeps only as much inventory as it needs during the production process.
With no excess inventory in hand, the company saves the cost of
storage and insurance. The company orders further inventory when
the old inventory stock is close to replenishment. This is a little risky
method of inventory management because a little delay in ordering
new inventory can lead to a stock-out situation. Thus this method
requires proper planning so that new orders can be timely placed.
Material Requirements Planning (MRP) Method
Material Requirements Planning is an inventory control
method in which the manufacturers order the inventory
after considering the sales forecast. MRP system integrates
data from various areas of the business where inventory
exists. Based on the data and demand in the market, the
manager would carefully place the order for new inventory
with the material suppliers.
Economic Order Quantity (EOQ) Model
Economic Order Quantity technique focuses on making a decision regarding how much quantity of
inventory the company should order at any point in time and when they should place the order. In this
model, the store manager will reorder the inventory when it reaches the reordering level. EOQ model helps
to save the ordering cost and carrying costs incurred while placing the order. With the EOQ model, the
organization is able to place the right quantity of inventory.
Minimum Safety Stocks
The minimum safety stock is the inventory level that an organization maintains to avoid a stock-out
situation. It is the level when we place the new order before the existing inventory is over. For example, if
the total inventory in an organization is 18,000 units, they place a new order when the inventory reaches
15,000 units. Therefore, the 3,000 units of inventory shall form part of the minimum safety stock level.
VED Analysis
VED stands for Vital Essential and Desirable. Organizations mainly use this technique for controlling
spare parts of inventory. Like, a higher level of inventory is required for vital parts that are very costly and
essential for production. Others are essential spare parts whose absence may slow down the production
process. Hence it is necessary to maintain such inventory. Similarly, an organization can maintain a low
level of inventory for desirable parts whose requirement does not arise more often for production.
How does Amazon inventory work? When sellers choose to use FBA, they automatically gain
access to Amazon's machine learning-based inventory management system. This system uses inputs
like the cost of goods sold, shipment time, and Amazon data to forecast customer demand and set
optimum inventory levels.
Amazon allows brands to manage their inventory through their internal Amazon Inventory
Management System. Each product can have inventory in four categories. For each product the
Amazon Inventory System will show the following breakout: Available — The current quantity available
to ship to customers.
The inventory model, which Walmart and Amazon use in the United States, is where the
goods and services are owned by an e-commerce firm that sells directly to retail customers.
Globally, Amazon operates more than 175 fulfillment centers with over 150 million square feet
of space.
Thank You