INVENTORY MANAGEMENT AND CONTROL

INVENTORY MANAGEMENT AND CONTROL

1. WHY DO WE NEED TO MANAGEMENT INVENTORY

   • We need to do it because: 1. Maximizing customer service 2. Maximizing efficiency (Purchasing/Production) 3. Minimizing inventory investment 4. Maximizing profit
   • Very important
     • Unless inventories can be controlled, they will always be:
       • Unreliable • Inefficient • Costly

2. Inventory

   • Inventory is the psichal stock of goods or economic resources that are stored for smooth, efficient and effective functioning of a business
   • Important
     • An effective inventory management allows a distributor to meet or exeed, his/her expectations.

3. The inventory planning pyramid

4. Objectives of inventory management

   • A) Minimize the possibility of disruption in the production schedule of a firm.
   • To keep down capital investment in inventories

5. Purpose of inventory management

   • To strike the balance between to much and to low inventory

6. Inventory

   • Its a very expensive asset
     • It can be replaced with another one which is less expensive that is called information.
       • This can be, timely, accurate, reliable and consistent.

7. Effective inventory management should

   • a) Maintain sufficient stock of raw material b) Ensure the continuos supply of materials to production facilitating and interrupted operations. c) Minimize the carriying cost and time. d) Maintain sufficient stock for smooth sales Operation.

8. What can be a inventory cost?

   • • Damage • Time • Space • Maintenance • Labor • Holding • Absolescence • Deterioration

9. Inventory cost usually falls into two categories:

   • Holding Ordering

10. Fluctuaciones in demand

    • We don’t always know how much you are likely to need at a given time, but you still need to satisfied costumer or production on time.

11. Inventory functions

    • Balancing, supply and demand
      • It means replacing consumed items and liquidating seasonal items
    • Improving officiency
    • Establishing a safety stock
      • When controlling inventory, one function is maintaining safe stock, this means having an additional stock in case of unexpected delays in delivery.
    • Geographical especialization
      • It involves Maximizing the asset each of the different business locations factors to considere include labor, transportation, energy, etc

12. Types of Inventorys

    • Raw Materials
      • It refers to the one used to produce partial or completed products and goods
    • Working Process (WIP):
      • These are the items during the time process which its being converted into partil or finished goods.
    • Finished Goods
      • Everything which is ready to be sold

13. Pillars of inventory management

14. Inventory control

    • It refers to the planned approach of determining what to order, when to order and how much to order, so that cost associated with Buying and storing be optimal without interruptions in production and sales.

15. ECONOMIC ORDER QUANTITY

    • One of the oldest and most commonly know inventory control techniques. Relatively easy to use however it makes a number of assumptions
      • EOQ FORMULA
        • √((2(A)(Cp))/Ch)

16. Reorder point (ROP)

    • Reorder point is a technique use to determine “when to order”. The reorder point is the minimun level of inventory at which a new order most be placed
      • ROP FORMULA
        • ROP=(Average usage per unit)(Lead time)+S.S.

17. Safety Stock

    • Is the stock held (detenido) by a company in exess of its requirements
      • SS FORMULA
        • S.S.=(Maximun daily usage-Average daily usage)(L/T)

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