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Definition

Definition. The word inventory refers to any kind of resources that has economic value and is maintained to fullfill the present and future needs of an organization Eg:- Manufacturer, Hospital , Bank , Airline. The meaning of inventory control. What item should be stocked

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Definition

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  1. Definition The word inventory refers to any kind of resources that has economic value and is maintained to fullfill the present and future needs of an organization Eg:- Manufacturer, Hospital , Bank , Airline

  2. The meaning of inventory control • What item should be stocked • When should an order be placed replenish inventory • Periodic review system • Fixed order quantity system • Optional restock system • How much should be ordered in each replenishment

  3. Functional role of inventory • Lot-Size inventory:- the amount of inventory depends upon the production lot size , ware house space available , replishment lead time etc. • Pipeline inventory :- items cannot be instaneous, optimal inventory level is required for shipment of inventory items to distribution centres and customer for production centres • Safety inventory • Seasonal inventory • Decouling inventory

  4. Reasons for carrying inventory • Improve customer service • Reduced costs • Maintenance of operational capability • Irregular supply and demad • Quantity discounts • Avioding stockouts

  5. Inventory cost components • Purchase cost • Carrying cost • Set-up cost • Shortage and customer service cost • Total inventory cost

  6. Classification of EOQ Models C = Purchase cost of an item(Rs per unit time) Co = ordering cost per order item(Rs per unit time) R = cost of carring one rupee’s worth of inventory expressed in terms of per cent of rupee value of inventory item(per cent per unit time)

  7. Ch =C.r = cost of carring one unit of an item in the inventory for a given length of time (Rs per item per unit time) • Cs =shortage cost per unit time(Rs per unit time) • D = annual requirement (demamd) of an item(unit per unit time) • Q = order quantity , number of units ordered per order (units)

  8. ROL = reorder level i,e the level of inventory at which an order is placed(units) • LT replenishment lead time (time period) • n = number of orders per time period(order per unit time) • t = reorder cycle time (time period) • tp = production period (time period)

  9. rp = production rate (quantity per unit time) • TC = total inventory cost (Rs) • TVC = total variable inventory cost (Rs)

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