INVENTORY

CONTROL

Explained By:
Sarbjit Kaur.
Lecturer, Department of Computer
Application,
PGG.C.G., Sector: 42, Chandigarh

NEED OF INVENTORY
CONTROL
TO

ENSURE CONTINUOUS SUPPLY : IT IS

REQURIED SO THAT PRODUCUTION
SHOULD NOT SUFFER AT ANT TIME AND
THE CUSTOMERS DEMAND SHOULD ALSO
BE MET
TO ENSURE PROPER INVESTMENT :
THERE SHOULD BE NO OVERSTOCKING
AND UNDERSTOCKING AND INVETORY
CONTROL HELP IN IT.

CONTD
TOREDUSE

THE MATERIAL COSTS: A

GOOD INVENTORY CONTROL SYSTEM
CAN LEAD TO MINIMIZATION OF MATERIAL
COST.
TO MINIMIZE LOSSES: IT CAN MINIMIZE
THE LOSSES OF INVENTORY THROUGH
DETERIORATION WASTAGES AND
DAMAGES.
TO ELIMINATE DUPLICATION : THE SAME
MATERIAL CAN BE ORDERED BY
DIFFERENT PERSON SO BY INVENTORY
CONTROL AVOID THIS PROBLEM.

TECHNIQUES OF
INVENTORY CONTROL

ABC ANALYSIS
VED ANALYSIS
AGEING ANALYSIS
FNSD ANALYSIS
HML ANALYSIS
XYZ ANALYSIS
SOS ANALYSIS
PREPECTUAL INVENTORY SYSTEM
ECONOMIC ORDER QUANTITY

PREPECTUAL INVENTORY
SYSTEM
A SYSTEM OF RECORDS MAINTAINED
BY THE CONTROLLING DEPARTMENT,
WHICH REFLECTS THE PHYSICAL
MOVEMENTS OF THE STOCK AND
THERE CURRENT BALANCE.

THIS SYSTEM MAKES USE OF

EXTENSIVE RECORDS ,RECIPETS,
ISSUSES ,RETURNS ETC. OF MATERIALS
ARE RECORDED IN A CONTINUOUS
BASIS IN A SORED DEPARTMENT.

FNSD ANALYSIS
F-FAST

MOVING ITEMS IN INVENTORYARE

THOSE ITEMS WHICH ARE CONSUMED
WITHIN A SHORT PERIOD OF TIME
N-NORMAL MOVING ITEMS ARE THOSE
WHICH ARE CONSUMED WITHIN A YEAR .
S-SLOW MOVING ITEMS ARE THOSE
STOCKS WHICH HAVE A LOW TURNOVER
RATE.
D-DEAD ITEMS DENOTES TO THAT STOCK
FOR WHICH NO PRESENT DEMAND EXIST
AND NO FORECAST CAN BE MADE OF
FUTURE DEMAND.

HML CLASSIFICATION
H-HIGH

VALUE ITEMS
M-MEDIUM VALUE ITEMS
L-LOW VALUE ITEMS
IT IS USEFUL FOR KEEPING CONTROL OVER
MATERIALS CONSUMPTION AT THE
DEPARTMENT LEVEL.
XYZ CLASSIFICATION IN THIS THE ITEMS
HAVING HIGHEST INVENTORY ARE
CLASSIFIED AS X, AND WITH LOW
INVESTMENT IN THEM TERMED AS Z
ITEMS,OTHER ITEMS ARE Y WHOZ INVENTORY
IS NITHER TOO HIGH OR LOW

SOS CLASSIFICATION
S-

SEASONAL ITEMS
OS- OF SEASONAL ITEMS
IT

IS USEFUL FOR DECIDING THE

TIME OF PURCHASE , SO THAT
THE COST OF MATERIAL AND
HOLDING COST MAY B BALANCED.

ABC Analysis
Any stock is segregated into different sections.
These items are classified into 3 sections, A, B
and C. The logic of segregating these items
into sections is that section A consists of limited
number of items that are very expensive.
Section B has items that are not expensive and
the number of units that is to be ordered is also
not very large. The section C consists of
numerous items, that have a low monetary
value

Economic Order
Quantity :
Different

models take different costs into account.

One of the popular model developed for items of
repetitive nature (dynamic), future demands for
which can be projected with certainty is Economic
Order Quantity (EOQ) model.
In addition to factors mentioned above, this
model assumes that price of the material remains
constant with time and also does not vary with
order quantity. This model can be developed
mathematically by differentiating total cost of with
respect to Quantity. The formula so derived is
given below :
E.O.Q=