For financial management

1. INVENTORY MANAGEMENT
Jobin Joseph

2.  Inventory is a list for goods and materials, or
those goods and materials themselves, held
available in stock by a business.
 A stock of items held to meet future demand.
Jobin Joseph

3. Meaning of inventory
The meaning of inventory is stock of goods.
In accounting language it may include:
Raw material
They are required to carry out production activities
successively
Jobin Joseph

4. Work-in-progress
It is a stage of stocks between raw material & finished goods.
Consumables
These are needed to smoothen the process of production
Finished goods
These are the goods which are ready for the consumers
Spares
Form a part of inventory
Jobin Joseph

5. ‡
 Transaction Motive :- To facilitate Continuous
Production.
 Speculative Motive :- For taking advantage of
price fluctuations, saving in re-ordering costs and
quantity discounts, etc.
 Precaution Motive :- For meeting unpredictable
changes in demand and supplies of materials
Jobin Joseph

6. An efficient system of inventory management will
determine.
 What to purchase
 How much to purchase
 From where to purchase
 Where to store
Jobin Joseph

7.  To ensure continuous supply of raw material,
spares and finished goods.
 To avoid both over stocking and under stocking
of inventory.
 To maintain investments in inventories at
optimum level.
Jobin Joseph

8.  To eliminate duplications in orders.
 To keep material cost under control.
 To minimize losses through wastage and
damages.
Jobin Joseph

9.  Stock Levels
 Safety Stocks
 Ordering System of Inventory
 Determination of EOQ
 ABC Analysis
Jobin Joseph

10.  VED Analysis
 Inventory Turnover Ratio
 Aging Schedule of Inventories
 Classification & Codification on Inventories
 Inventory Reports
Jobin Joseph

11. Determination of stock level
Minimum level = reordering level-(normal
consumption * normal reordering period )
Maximum level = reordering level+ reordering quantity
+ (minimum consumption * minimum reordering
period )
Danger level = consumption * maximum reorder
period
Jobin Joseph

12. Determination safety stocks:
Safety stock is a barrier to meet some surprising
increase in usage.
Jobin Joseph

13. 1.Opportunity cost of stock outs
2.Carrying cost
Inventory Turn Over Ratio = Cost of good
sold/Average inventry at cost
Jobin Joseph

14.  EOQ is the size of the portion to be purchased
which is economically viable
 EOQ is made up of 2 parts
1. Ordering cost-These cost are associated with the
purchasing or ordering of the material
2. Carrying cost- these are the cost for holding the
inventories
Jobin Joseph

15. The materials are divided into three categories via,
A, B&C
Group A
Under this almost 10% of the items contribute
to70% of value of consumption.
Jobin Joseph

16. Group B
Under this category 20% of the items contribute about
20% of value of consumption.
Group C
Under this category about 70% of items of material
contribute only 10% of value of consumption.
Jobin Joseph

17.  The VED analysis is used generally for spare
parts.
 The requirements and urgency of spare parts is
different from that of materials.
 Spare parts are classified as
vital(V),essential(E),desirable(D)
Jobin Joseph

18. The management is kept informed with the latest
stock position of different items by preparing
periodical inventory reports. On the basis of these
reports management takes corrective action
wherever necessary.
Jobin Joseph

19. Jobin Joseph